|April 4, 2013|
Under the Affordable Care Act (“ACA"), a group health plan may not impose a waiting period of more than 90 days before an employee is eligible for coverage. The Internal Revenue Service, Department of Labor and Health and Human Services have jointly issued proposed regulations interpreting this requirement. The proposed regulations are generally consistent with guidance previously issued by those agencies in August 2012.
The new rules apply to both grandfathered and non-grandfathered plans. They take effect on the first day of the plan year starting in 2014 (January 1, 2014 for a calendar year plan). It is important to note that the rules do not require coverage of any particular group of employees, such as part-time employees. They merely limit the period of time that must pass before an otherwise eligible employee (or dependent) may enroll in a group health plan. If an employee enrolls late, there is no violation of the waiting period requirement.
Two clarifications included in the proposed rules were not included in the prior guidance:
(a) Strict Interpretation of 90-Day Rule - Many plans, especially insured plans, impose a 90-day waiting period with eligibility for coverage to start on the first day of the following month. This will no longer be acceptable as coverage must be available no later than the 91st day after an employee is otherwise eligible. It is also not acceptable to have coverage start on the first business day after the end of the 90-day waiting period as if the 91st day fell on a weekend or holiday, the waiting period would exceed 90 days. It is permissible to provide either that (i) coverage is available on the 91st day after hire, or (ii) if it is desired to have eligibility for coverage start as of the first day of a month, coverage is available on the first of the month following a 60-day waiting period.
(b) Employees in a Waiting Period on the Effective Date - An employee who is in a waiting period on the effective date must be eligible to commence coverage on the later of (i) January 1, 2014 (assuming a calendar year plan) or (ii) the 91st day after his/her date of hire. For example, if a calendar year plan had a four-month waiting period and an otherwise eligible employee was hired on October 1, 2013, he/she must be eligible to commence coverage no later than January 1, 2014 (93 days after his/her employment start date).
If a plan only offers coverage to employees who work a minimum number of hours per period (full-time employees), an employer may establish a measurement period that does not exceed 12 months to determine if a variable-hour employee meets the hourly requirement. If the employee satisfies the hourly requirement, he/she must be eligible for coverage within 13 months after his date of hire.
A plan may require that an employee be credited with a cumulative number of hours in order to be eligible as long as the cumulative number of hours does not exceed 1,200. This is a one-time eligibility requirement and may not be imposed annually.