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Counting to 90: PPACA and the Waiting Period

Posted in Plan Administration, Welfare Plans

Under PPACA, once we decide who we have to offer coverage to, then we have to decide when they get the coverage.  Generally the new rule is that a waiting period for coverage cannot exceed 90 days.  So now the IRS has given us proposed rules on the 90 day waiting period.  As with all other proposed rules, they are not final until they are final, but these do give employers some additional guidance on how to maintain the correct waiting period.

The proposed regulations define a waiting period as “the period that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of a group health plan can become effective.”  What this means is that once eligibility requirements are met (meaning that an employee is "full time"), coverage must begin 90 calendar days after eligibility is obtained.  This includes weekends and holidays.  If day 91 falls on a weekend or holiday, the plan sponsor may elect to have coverage be effective earlier than the 90th day, for administrative convenience, but may not delay coverage past the 91st day.  So plan sponsors should eliminate any plan provisions that provide that coverage begins at some time after the 90th day (like the first day of the month after the expiration of the 90 day period).

The proposed rule also provides that a plan may impose eligibility criteria such as completion of a period of days of service (which may not exceed 90 days), attainment of a specific job category, or other criteria, so long as they have not been designed to avoid compliance with the 90-day waiting period.  For example, a plan provides coverage only to employees with the title of manager.  John is hired on September 1, 2014 as an associate.  On April 1, 2015, he is promoted to manager.  John must be offered coverage no later than July 1, 2015.  This does not mean that John might not have otherwise been offered coverage as a full-time employee.  So be wary of reading too much into this job classification option.  We still have to measure how many hours John works even as an associate.

Also, there had been some question about certificates of creditable coverage being required after January 1, 2014.  The proposed rules provided that these certificates will be phased out by 2015 because PPACA’s prohibition on exclusions from coverage due to pre-existing health conditions renders them obsolete.  Since pre-existing condition exclusions have to be eliminated for plan years beginning on or after January 1, 2014, these certificates are no longer necessary.  But they still have to be provided throughout the 2014 plan year.

There are other specifics in the proposed rules that will have to be fleshed out and, again, these rules are proposed and subject to change.  But they serve as an ongoing reminder that plan sponsors have to be watchful of how they administer their plans and must make sure that their stated eligibility rules satisfy the requirements of both ERISA and PPACA.