Hunton Employment & Labor Perspectives

On June 25, the government issued final rules regarding the use of “bona fide employment-based orientation periods” in connection with the Affordable Care Act’s 90 day waiting period limits. These final rules largely track the proposed rules issued in February.

The final rules permit plans to condition health plan 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.  Thus, where a bona fide orientation period is used, an otherwise eligible employee could be required to wait up to as many as 120 days before becoming eligible without violating ACA’s waiting period rules.

The final rules provide that the one-month limit is calculated by adding one calendar month and subtracting one calendar day, measured from the employee’s start date in the eligible position.  For example, it would be permissible to subject an employee who starts on May 3 to an orientation period that runs through June 2 before applying a 90-day waiting period.  The final rules also provide that if there is no corresponding date in the next month (e.g., a start date of January 31), the orientation period ends on the last day of the next calendar month (e.g., February 28 or February 29 in a leap year).

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.  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. For more information on the earlier rules, see our summaries of the proposed 90-day waiting period rules in December 2012 and of the final rules on both the employer mandate and the 90-day waiting period requirement in April 2014.