ACA Orientation Period and the 90-Day Waiting Period

 

KEEPING YOU INFORMED…

As we advised in our February 25, 2014 memorandum (copy attached), effective January 1, 2014, the Affordable Care Act (“the ACA”) prohibits a waiting period in excess of 90 calendar days before an individual is eligible to enroll in health insurance coverage. The Departments of Labor, Health and Human Services, and Treasury (“the Departments”) recently issued final regulations regarding the impact of an employer’s orientation period on that 90-day limit. The final regulations clarify that the 90-day waiting period may commence following a bona fide, employment-based orientation period not exceeding one month. The final regulations apply to group health insurance plans beginning on or after January 1, 2015. Until then, employers must follow the proposed regulations on orientation periods, which are substantively the same as the final regulations.

The preamble to the regulations provides that the Departments intended that a reasonable and bona fide orientation period involve the commencement of an orientation and training process during which an employer and employee may evaluate whether the employment relationship is satisfactory to each party. The one-month limitation on that orientation period is calculated by adding one calendar month to the employee’s start date and then subtracting one day. For example, if a plan conditions eligibility for health insurance coverage on an employee first completing an orientation period, the 90-day waiting period must begin the calendar day after the completion of the one-month (or less) orientation period. Therefore, if an employee starts on October 1, the orientation period, for purposes of the 90-day waiting period rule, must end on or before October 31 (October 1 plus one calendar month is November 1, minus one day is October 31) and the 90-day waiting period must begin on or before November 1.

We will continue to apprise you of any new substantive developments with regard to the ACA. Please contact us if you have any questions about complying with the orientation period, the 90-day waiting period limitation or any other related issues.

THIS MEMORANDUM IS MEANT TO ASSIST IN GENERAL UNDERSTANDING OF THE CURRENT LAW. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. THOSE WITH PARTICULAR QUESTIONS SHOULD SEEK THE ADVICE OF COUNSEL.

TAX ADVICE DISCLOSURE: THIS WRITTEN COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER.  THIS STATEMENT HAS BEEN PROVIDED PURSUANT TO U.S. TREASURY REGULATIONS GOVERNING TAX PRACTICE.

© Lamb & Barnosky, LLP 2014