Adding a one-month orientation period may help an employer avoid complying with the new health benefits mandate by about one-third. Federal agencies are offering employers a benefits-free orientation period option in a new batch of final regulations.
The Internal Revenue Service (IRS), the Employee Benefits Security Administration (EBSA) and the U.S. Department of Health and Human Services (HHS) are preparing to publish the regulations, Ninety-Day Waiting Period Limitation (CMS-9952-F2) (RIN 0938-AR77), in the Federal Register Wednesday.
The new regulations implement part of the “employer shared responsibility” provisions created by the Patient Protection and Affordable Care Act (PPACA).
Section 4980H of the Internal Revenue Code (IRC) now calls for most large and midsize employers to offer “minimum essential coverage” (MEC) to employees. If employers fail to offer MEC, and some workers end up qualifying for Medicaid or for PPACA public exchange plan subsidies through the new PPACA public exchange system, the employers could end up having to pay penalties. An employer can keep a new employee out of the employer coverage mandate calculations during a 90-day waiting period.
The Obama administration has said it wants to start applying the mandate provision to employers with 100 or more employees Jan. 1, 2015. If agencies stick to that schedule, employers with 51 to 99 employees may be able to wait until Jan. 1, 2016, to comply if they agree to abide by transition relief program rules. Midsize employers that want to cut back on health benefits might have to start complying with the mandate in 2015.
In February, the IRS, EBSA and HHS published general waiting period regulations.
The agencies developed the new regulations to respond to members of the public who asked them come up with rules for employee orientation periods.
The agencies say in the preamble to the new final regulations that they want to be able to let employers add a “reasonable and bona fide employment-based orientation period” to the 90-day waiting period without letting an employer use an orientation period as a subterfuge to put off providing coverage. The agencies are assuming that a typical bona fide orientation period will last one month — 28 to 31 days, or about one-third of the 90-day waiting period provided by PPACA.
In some cases — if, for example, an employee in orientation needs more than one month to qualify to become an active employee — an employer could exclude the employee in orientation from the active-employee count for a longer period. ”A plan may impose substantive eligibility criteria, such as requiring the worker to fit within an eligible job classification or to achieve job-related licensure requirements,” officials say in the preamble. But the plan “may not impose conditions that are mere subterfuges for the passage of time,” according to officials.