Stay informed and ready to meet both everyday challenges and long-term planning and policy-making goals, with focused news, practical information, and strategic insights on all HR-related...
By Sean Forbes
Feb. 25 --The one-month orientation period included in the proposed rules on the Affordable Care Act's 90-day waiting period limit for health benefits coverage was “a bit of a surprise,” and will need clarification, practitioners told Bloomberg BNA.
The rules, released Feb. 20, would allow employers to use a 30-day “bona fide” orientation period for new employees before starting the clock on the 90-day eligibility period (32 HRR 177, 2/24/14). The rules were issued jointly by the Treasury Department's Internal Revenue Service, the Department of Health and Human Services and the Department of Labor's Employee Benefits Security Administration.
A DOL spokesman confirmed Feb. 21 that the proposed rules would allow employers and plan sponsors an orientation period of up to 30 days before the 90-day waiting period begins, meaning that some employees might have to wait as much as 120 days after starting a job before they're eligible for coverage.
Employers should be very careful in how they read the proposed rule, Alden J. Bianchi, a member at Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC in Boston, said Feb. 24.
“If anyone reads that rule to think that 90 days is really 120 days, they're deluding themselves, because it's very specific. You need to have a very particular bona fide reason why you need that orientation period. You just don't get it automatically,” Bianchi said.
It's even difficult to formulate examples of bona fide orientation periods, Bianchi said.
He said his own firm uses an orientation period for new employees but that it lasts only three days. He said new employees at the firm are pretty well versed in general on how to do their jobs, so the orientation period is to show them how the firm approaches it. “That would be a very difficult distinction to write into a final regulation,” Bianchi said.
Tracy Watts, senior partner in the Washington office of Mercer, said Feb. 25 that examples of a bona fide orientation period could include a probationary period or a training program for new hires.
Christine L. Keller, a principal at Groom Law Group Chartered in Washington, also said the orientation proposal was a bit of a surprise, and while it's helpful, may not be nearly long enough for workforces that have probationary periods of longer than 30 days.
The agencies might consider a longer period based on whether they receive comments about longer periods, “but they probably are reluctant to make it much longer because they are concerned that this would be a means to just avoid the 90 days,” Keller said.
“But I think the challenge with these rules is that there's a tension between, on the one hand, saying you can come up with your eligibility criteria, you could exclude part-timers, you could exclude certain categories, and on the other hand, they're looking carefully at those eligibility criteria to make sure none of them is a subterfuge for what they would view as delaying people who otherwise would be able to enroll from enrolling. So I do think it's a bit of a tricky rule,” she said.
Keller also offered two examples involving collectively bargained agreements with probationary periods. In the first, a union contract states that new hires become union members--and eligible for health benefits under a multi-employer plan--only after satisfying a 45-day probationary period. In the second, new employees must complete 90 working days in a specific training program before they become union members and eligible for benefits under a multi-employer plan.
Before the new proposed rules were issued, both situations likely would have met the ACA's 90-day waiting period limit, because health benefits eligibility would have been based on union membership, not strictly on a lapse of time, she said. In addition, such eligibility criteria would have appeared to have been designed to accommodate the unique operating structure of the multi-employer plan, not to sidestep the 90-day rule. But in light of the proposed rules, the probationary period would be less likely to satisfy the requirement of a “reasonable and bona fide orientation period” because it lasts for more than one month, Keller said, and the same may be true for the training program as well.
“It appears that an employer can still require an employee to complete 'specified training' and achieve 'specified certifications,' ” as per Treasury Regulation § 54.9815-2708(f). The time for completing the training and achieving the specifications is not limited and will not count against the 90-day waiting period, she said.
“So, it will now be necessary to distinguish between training (which can be any length) and orientation (which can only be a month). It appears that a 'certification' may be required for something to qualify as 'training,' but it's not clear what type of certification it would have to be,” Keller said.
The Treasury regulation to which Keller referred was finalized the same day as the proposed orientation period rules were issued.
In a webinar hosted Feb. 26 by American Law Institute Continuing Legal Education, Lonie A. Hassel, a principal in the Washington office of Groom Law Group, fielded a question from a listener dealing with collective bargaining agreements that have probationary periods as long as six months. The questioner asked whether the probationary period is a substitute eligibility condition so as to allow the 90-day period to begin after satisfaction of probation, or whether it's a form of new orientation period to be limited to one month.
“This is a hard question,” Hassel said. “I think it's probably a risk to call something a probationary period, because I think it sounds very much like an orientation period,” she said.
However, one method that some multi-employer plans are trying is using the cumulative-hours-of-service requirements to tackle this problem, she said.
“If that probationary period can be treated as a cumulative hours requirement, and it doesn't exceed 1,200 hours,” Hassel said, then “that is one way that a CBA with that six-month waiting period--to use an old-fashioned term--might be in compliance with the limits on waiting periods. This is something that some plans are trying. We don't have guidance that is particularly helpful in the context of collective bargaining agreements, but that is a way that you could try,” Hassel said.
The final rules issued along with the orientation period rules said if a plan's eligibility criteria require employees to complete a certain number of cumulative hours of service, it wouldn't be “considered to be designed to avoid compliance with the 90-day waiting period limitation if the cumulative hours-of-service requirement does not exceed 1,200 hours.”
To contact the reporter on this story: Sean Forbes in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Phil Kushin at email@example.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)