New Final Regulations Issued Regarding the 90-Day Waiting Period and Orientation Periods

By Kristi R. Gauthier
Clark Hill PLC

On June 25, 2014, the Department of Health and Human Services, the Department of Labor, and the Department of Treasury (collectively, the “Departments”) jointly issued Final Regulations clarifying the maximum allowed length of a “reasonable and bona fide employment-based orientation period” and the relationship between the orientation period and the 90-day waiting period allowed by the Final Regulations issued in February 2014. These new Final Regulations are scheduled to apply for plan years beginning on or after January 2015.

Final Regulations issued earlier in February 2014 stipulated that group health plans may not impose any waiting period exceeding 90 calendar days, including weekends and holidays. A waiting period is a period of time that must elapse before coverage becomes effective for an employee, or dependent, who is otherwise eligible to enroll under a group plan’s terms.

The Departments acknowledged that the use of orientation periods, trial periods, or probationary periods is common. The practice allows employers and newly hired employees to evaluate the employment relationship and determine whether it is satisfactory for both parties before commencing the 90-day waiting period to begin coverage. The new Final Regulations state that such orientation periods may not exceed one month.

If an employer imposes an orientation period, the 90-day waiting period begins the first calendar day after the orientation period. For the purposes of the orientation period, a month is measured by adding one calendar month from the employee’s start date in a position eligible for coverage and subtracting one calendar day. For example, if an employee is hired on January 5, the final day of the orientation period must be no later than February 4. If there is no corresponding calendar date in the month following the employee’s start date, the employee’s last permitted orientation date is the last date of the calendar month following the employee’s start date in the position eligible for coverage. 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 if it is a leap year).