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Health Care Reform: Agencies Issue Final and Newly Proposed Rules on Waiting Periods

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February 2014

The Internal Revenue Service (IRS), Department of Labor (DOL), and HHS (collectively, the “Agencies”) simultaneously issued final and proposed regulations regarding health plan eligibility waiting periods under the ACA. Like the proposed rules that were issued in March 2013, the final rules state that employers may not impose a time-based waiting period longer than 90 calendar days (including weekends and holidays) after an employee’s hire date. An employer may also impose a cumulative service-based requirement not exceeding 1,200 hours as long as any waiting period (not exceeding 90 days) begins the day after an employee has satisfied the service requirement.

The final rules also clarify that an employee who is re-hired may be treated as being newly eligible for coverage upon re-hire, and may therefore be required to satisfy the plan’s eligibility plan criteria anew. The regulations provide that the same analysis would apply to an employee who moves to a job classification that is ineligible for coverage, but then moves back to an eligible job classification. In both situations, the rules state that the waiting period and eligibility criteria must be reasonable under the circumstances. For example, the termination/re-hire and change of job classifications cannot be a subterfuge to avoid compliance with the 90-day waiting period rules.

These final rules take effect for plans beginning on or after January 1, 2015. For plan years beginning in 2014, the Agencies will consider employers compliant with the ACA if they comply with either these final rules or the proposed rules issued in March 2013.

The Agencies also issued proposed rules providing that employers may impose a maximum “reasonable and bona-fide employment-based orientation period” of one month in addition to any waiting period. In the preamble to the regulations, the Agencies stated that during the orientation period, they envision that an employer and employee could evaluate whether the employment situation was satisfactory for each party, and standard orientation and training processes could begin. The proposed rules state that the maximum orientation period would be determined by adding a calendar month and subtracting a calendar day from an employee’s hire date (for example, the last permitted orientation day for an employee with a hire date of May 3 would be June 2). If the next calendar month does not have a corresponding date, the last permitted orientation day is the last day of the next calendar month (for example, the last permitted orientation day for an employee with a start date of January 31 would be February 28, or February 29 in a leap year). These proposed rules may be relied on at least through the end of 2014. The Agencies are inviting comments on the proposed rules, which must be received by April 25, 2014.

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