These final rules largely track the proposed rules issued in February 2014.
Under existing regulations, a waiting period is a period of time that must pass before coverage for an otherwise eligible individual becomes effective. Being otherwise eligible means the individual has met the plan’s eligibility conditions. The final rules permit plans to condition health coverage eligibility on an employee’s completion of an employment-based orientation period of up to one month before application of the 90-day waiting period limits. A reasonable and bona fide employment based orientation period is permissible if it is not designed to avoid compliance with the 90-day waiting period limitation.
The 90-day waiting period limitation starts after the individual has met the group health plan’s terms for joining the health plan. These terms may include:
- Being in a job class that is offered benefits
- Getting a required license to do the job (as listed in the group health plan’s terms)
- After a time of “reasonable and bona fide employment-based orientation”
- Limit to the orientation period is one month, meaning one calendar month minus one day.
- The waiting period must begin on the next calendar day after the orientation period ends
Because Small Business Group Members may only be enrolled on the first of the given month, the longest probationary period a Small Business Group Employer may impose is the First Of the Month Following (FOMF) 60 days.
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What you need to know
- Probationary periods will not be modified to account for an orientation period.
Note, however, that the above orientation period rules do not apply in determining whether coverage is timely offered for purposes of the employer coverage mandate. Employers should consult their tax and/or legal counsel for potential impacts. Generally, to avoid potential penalties under the coverage mandate, affected employers generally must offer coverage to their “full-time” employees (within the meaning of the mandate) no later than the first day of the fourth full month of employment. For example, if a full-time employee is hired on January 6, plan coverage must be offered by May 1 to comply with both the mandate and the 90-day waiting period rules. If, however, coverage is offered effective May 6, the employer would be treated as having failed to offer coverage for that month, which could potentially expose the employer to coverage mandate penalties (even though it complied with the orientation/waiting period rules).
The final orientation period rules are effective for plan years beginning on or after January 1, 2015; the proposed rules can be relied on for plan years beginning before that date.
This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. Since the orientation period must be reasonable, bona fide, and employment based, and because there can be impacts under employer mandate rules, the employer should consult with their own legal counsel to determine if and how they can implement an orientation period.