Final Affordable Care Act Regulations Clarify 90-Day Waiting Period Limitation

Author: Gloria Ju

June 25, 2014

The Internal Revenue Service (IRS), Employee Benefits Security Administration (EBSA) and Department of Health and Human Services (HHS) published final regulations today on the Affordable Care Act's (ACA's) 90-day waiting period limitation clarifying the maximum length allowed for an employment-based orientation period that precedes the waiting period.

The final regulations provide that an orientation period may not be longer than one month. One month is determined by adding one calendar month and subtracting one calendar day, measured from an employee's start date in a position that is otherwise eligible for coverage. For example, if an employee's start date is May 3, the last permitted day of the orientation period is June 2. If there is not a corresponding date in the next calendar month upon adding a calendar month, the last permitted day of the orientation period is the last day of the next calendar month. For example, if the employee's start date is January 30, the last permitted day of the orientation period is February 28 (or February 29 in a leap year).

The 90-day waiting period must begin on the first day after the orientation period.

Compliance with the final regulations does not determine compliance with the employer shared responsibility (or pay or play) mandate, which requires an applicable large employer to offer affordable minimum value coverage to certain newly hired full-time employees by the first day of the fourth full calendar month of employment or else pay a penalty. Therefore, an applicable large employer plan may not be able to impose the full one-month orientation period and the full 90-day waiting period without potentially becoming subject to a penalty.

For example, if an employee is hired on a full-time basis on January 6, a plan may offer coverage May 1 and comply with both the employer mandate and the 90-day waiting period final regulations. However, if the employer starts providing coverage May 6, which is one month plus 90 days after date of hire, the employer may be subject to a penalty.

The final regulations are effective August 25, 2014, and apply to plan years beginning on or after January 1, 2015.