Background: The February 10th final regulation relating to the Affordable Care Act (ACA) contained much clarification of existing rules for employers. In addition to the one year ‘pay or play’ delay for employers with between 50 and 99 employees, proposed regulations on February 20 would provide for an orientation period preceding the waiting period.
Discussion: The final regulations state that a plan’s waiting period cannot exceed 90 days, and begins after an individual is determined to be ‘otherwise eligible’ for coverage under the terms of the plan. It is possible in some circumstances that employees are not considered benefit eligible until they complete an orientation period. The final regulations define the parameters of a permissible orientation period:
- a maximum period of one month
- measured by adding one calendar month and subtracting one calendar day from an employee’s start date
The orientation period would only be permissible for new employees who are hired into a position that is benefit eligible. It would not be permissible for new variable-hour employees who are placed in an employer’s measurement period under ACA. Full time employees who are eligible for coverage at the time of hire may not have an orientation imposed for purposes of delaying the effective date of coverage.
This orientation period allowance relates to the 90 day waiting period limit under the ACA, and applicable penalties under ERISA. It is not clear how it interacts with the employer mandate and Section 4980H penalties for employers who do not offer minimum value, affordable coverage within 90 days to eligible employees. There is a chance that for any period of time beyond 90 days that a full time employee is made to wait, an applicable large employer may still be subject to a shared responsibility payment despite this proposed rule allowing an orientation period.