Health Benefits Orientation Period for Adding New Employees Clarified

The IRS, Employee Benefits Security Administration, and Department of Health and Human Services have released a joint ruling aiming to clarify what’s been a big topic surrounding administering “waiting periods” for offering new employees coverage under the Affordable Care Act. The law states that any waiting period may not exceed 90 days from the first eligibility date, with all calendar days (business days, holidays and weekends) included in the count.

A potential loophole has been closed with the ruling. Employer orientation periods for new employees, commonplace when training and certification is required for types of employees in some businesses, can no longer exceed 30 days. This means that once the first 30 days are up, eligibility for health coverage must occur within the next 90 days. The ruling is applicable for plan years beginning on or after January 1, 2015.

The 30-day period is not necessarily as it appears though, as 30 days is measured by adding one calendar month and subtracting one calendar day. If an employee’s first day on the job is August 10 for example, the final day of their orientation would have to occur on September 9 at the latest. Their eligibility period then begins the following day on September 10 in this case, and can last no more than calendar 90 days.

The ruling is designed to curtail extensive employer orientation periods, while respecting that there are legitimate delays for health coverage eligibility beyond 90 days from date of hire. Caution is merited for employers to ensure that orientation periods are supportable for legitimate business purposes. Compliance penalties may result should enrollment practices be audited and a legitimate business need cannot be validated.