SECOND OPINIONS: Full-Time Employee and Waiting Period Guidance – Part III

 

November 14, 2012 (PLANSPONSOR.com) - The IRS recently issued two notices (Notice 2012-58 and Notice 2012-59) related to the ACA employer "shared responsibility" mandate requirement and waiting period limitation.
By PS

In two previous installments, we responded to certain questions we have received from employers regarding the ongoing and new employee look-back rules provided in Notice 2012-58.  In this installment, we respond to questions we have received from employers regarding the guidance in Notice 2012-59 on application of the 90-day waiting period limitation. 

What general waiting period guidance is provided in Notice 2012-59? 

Notice 2012-59, which was also issued in substantially identical form by the Department of Health and Human Services (HHS) and the Department of Labor (DOL), contains important clarifications regarding section 2708 of the Public Health Service Act, which prohibits group health plan waiting periods of longer than 90 days.  In general, the Notice reiterates the definition of the term “waiting period” and other guidance on the treatment of eligibility conditions provided in Notices 2011-36 and 2012-17.  It provides that a “waiting period” is defined as the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of the plan can become effective.   

May group health plans continue to use eligibility conditions? 

Group health plans generally may continue to have substantive eligibility conditions (e.g., limiting coverage to certain eligible job classifications).  However, any eligibility conditions that are based solely on the lapse of a time period are permissible for no more than 90 days.  Further, any such conditions may not otherwise be designed to avoid compliance with the 90-day waiting period limitation. 

Notice 2012-59 includes an example under which a group health plan provides coverage to part-time employees after they have completed a cumulative 1,200 hours of service.  In the example, the agencies concluded that the plan’s cumulative hours of service eligibility condition is not considered to be designed to avoid compliance with the 90-day waiting period limitation.  The agencies did, however, state that a cumulative hours of service requirement of more than 1,200 hours would be considered to be designed to avoid compliance with the 90-day waiting period limitation.

Does Notice 2012-59 contain guidance on coordination of the 90-day waiting period limitation and the new variable employee look-back rules? 

Notice 2012-59 provides guidance with respect to the application of the waiting period limitation to instances where an employer's group health plan conditions eligibility on an employee working a specified number of hours of service per period or working full-time, and the employer cannot determine whether a new variable employee is reasonably expected to work the required number of hours.  It provides that the plan is permitted to take a "reasonable period of time" to determine whether the employee meets the plan's eligibility condition, including through use of a measurement period of up to 12 months that is consistent with the look-back period guidance in Notice 2012-58.  An employer may use a measurement period consistent with the employer mandate look-back rules in Notice 2012-58 even if it is not a large employer subject to the employer mandate.  In general, an employer may use a look-back period method to determine whether the employee is eligible so long as coverage is made effective no later than 13 months from the employee's start date (plus, if the employee's start date is not the first day of a calendar month, the period until the first day of the next calendar month).  

 

Got a health-care reform question?  You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions    

You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html     

Contributors:  

Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.  

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.  

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. 

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