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Final regs clarify orientation period before ACA’s 90-day wait limit

Preamble to TD 9671, 06/20/2014; Reg. § 54.9815-2708

IRS, the Department of Labor, and the Department of Health and Human Services (the Departments) have issued final regs clarifying that one month is the maximum orientation period that can be imposed before the Affordable Care Act’s (ACA’s) 90-day waiting period begins to run. The 90-day limit applies to employer group health plans and health insurance issuers offering group health insurance coverage for new employees.

Background. Under Public Health Services Act §2708, which the ACA incorporates into the Code and ERISA, a group health plan or group health insurance issuer cannot impose, as a condition of eligibility for coverage under the plan, a waiting period that exceeds 90 days. When issuing the final rules on the 90-day waiting period, and defining a waiting period under Code Sec. 9801(b)(4) and ERISA §701(b)(4), the Departments also issued a proposal on the circumstances under which the duration of an orientation period would be considered reasonable or bona fide (see Weekly Alert ¶  32  02/27/2014).

New regs. Now, the Departments have finalized that proposal without any substantive changes. Thus, under the new final regs, the maximum length of any orientation period is one month.

The one-month orientation period can begin on any day of a calendar month, and is determined by adding one calendar month, and then subtracting one calendar day. Thus, for example, if an employee’s starts work on May 3, the last permitted day of the orientation period is June 2. (Reg. § 54.9815-2708(c)(3)(iii))

Illustration: An employee begins working full time for an employer on Oct. 16. The employer sponsors a group health plan, under which full time employees are eligible for coverage after they have successfully completed a bona fide one-month orientation period. If the employee completes the orientation period on Nov. 15, health plan coverage for the employee must begin no later than Feb. 14, which is the 91st day after the end of the orientation period. (Reg. § 54.9815-2708(c)(3)(iii), Ex. 111)
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