Skip to Content

ACA Waiting Period
July 08, 2014

This alert should interest employers who sponsor a group health plan and impose a waiting period on new employee eligibility.

Many employers require employees to work for a certain length of time before becoming eligible for employer-provided coverage. This is commonly called a “waiting period.” The Patient Protection and Affordable Care Act (ACA) prohibits waiting periods that exceed 90 days.

On June 25, 2014, the agencies charged with implementing the ACA (the Department of Labor, Internal Revenue Service, and Department of Health and Human Services) issued regulations addressing health care reform’s 90­day limit on waiting periods. Included in this guidance is the allowance of a “reasonable and bona fide employment-based orientation period” of up to 30 days that could be imposed before the waiting period.

In our opinion, the two most important aspects of this regulation are as follows:

  1. The term “reasonable and bona fide employment-­based orientation period” is not defined, and the agencies plan to look at all the facts and circumstances surrounding an orientation period in order to assess whether it is reasonable and bona fide. Whether a job requires special skills will likely be vital to this assessment. The preamble to this guidance contains the following, useful statement: “During an orientation period, the Departments envision that an employer and employee will evaluate whether the employment situation is satisfactory for each party, and standard orientation and training processes will begin.”
  2. Use of an orientation period still may not prevent an applicable large employer from incurring ACA penalties if a newly ­hired full­-time employee is not offered coverage by the start of his or her fourth calendar month. For this reason, a bona fide orientation period might be more useful in helping large employers set coverage start dates with a particular payroll period or the 1st of the month, instead of actually delaying coverage.

The full regulation is available here.

For more information, please contact the Carlton Fields attorney with whom you usually work, or the author of this Legal News Alert.
Authored By
Image: Lowell J. Walters
Lowell J. Walters
©2024 Carlton Fields, P.A. Carlton Fields practices law in California through Carlton Fields, LLP. Carlton Fields publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Carlton Fields. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact Us form via the link below. The views set forth herein are the personal views of the author and do not necessarily reflect those of the firm. This site may contain hypertext links to information created and maintained by other entities. Carlton Fields does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.

Disclaimer

The information on this website is presented as a service for our clients and Internet users and is not intended to be legal advice, nor should you consider it as such. Although we welcome your inquiries, please keep in mind that merely contacting us will not establish an attorney-client relationship between us. Consequently, you should not convey any confidential information to us until a formal attorney-client relationship has been established. Please remember that electronic correspondence on the internet is not secure and that you should not include sensitive or confidential information in messages. With that in mind, we look forward to hearing from you.