For plan years beginning on or after January 1, 2014, a group health plan or health insurance issuer may not use a waiting period that exceeds 90 days. Under Notice 2012-59, a waiting period is the period of time that must pass before coverage of an employee or dependent who is otherwise eligible to enroll can become effective. An employee is eligible for coverage when he or she meets the plan’s substantive eligibility conditions, such as, for example, employment within an eligible employment classification. Eligibility conditions that are based solely on the lapse of time are permissible for no more than 90 days.
If a group health plan bases eligibility on the completion of a specific number of hours of service during a period (e.g., a weekly or biweekly period) and the employer is unable to reasonably determine whether a new hire will meet this requirement, Notice 2012-59 permits the employer to measure the employee’s service over a measurement period that would be permitted under Notice 2012-58 (discussed above). To take advantage of this rule, coverage must become effective no later than 13 months from the employee’s start date, plus the time remaining until the first day of the next calendar month.
Notice 2012-59 contains the following examples:
- Facts. Employer X’s group health plan limits eligibility for coverage to full-time employees. Coverage becomes effective on the first day of the calendar month following the date the employee becomes eligible. Employee B begins working full time for Employer X on April ll. Prior to this date, B worked part time for X. B enrolls in the plan and coverage is effective May 1.
Conclusion. In this example, the period from April 11 through April 30 is a waiting period. The period while B was working part time is not part of the waiting period because B was not in a class of employees eligible for coverage under the terms of the plan while working part time, and full-time versus part-time status is a bona fide employment-based condition that is not considered to be designed to avoid compliance with the 90-day waiting period limitation.
- Facts. Under Employer Y’s group health plan, only employees who work full time (defined under the plan as regularly working 30 hours per week) are eligible for coverage. Employee C begins work for Employer Y on November 26 of Year 1. C’s hours are reasonably expected to vary, with an opportunity to work between 20 to 45 hours per week, depending on shift availability and C’s availability. Therefore, it cannot be determined at C’s start date that C is reasonably expected to work full time. Under the terms of the plan, variable-hour employees, such as C, are eligible to enroll in the plan if they are determined to be full time after a measurement period of 12 months. Coverage is made effective no later than the first day of the first calendar month after the applicable enrollment forms are received. C’s 12-month measurement period ends November 25 of Year 2. C is determined to be full time and is notified of C’s plan eligibility. If C then elects coverage, C’s first day of coverage will be January 1 of Year 3.
Conclusion. In this example, the measurement period is not considered to be designed to avoid compliance with the 90-day waiting period limitation (and is, therefore, permissible) because the plan may use a reasonable period of time to determine whether a variable-hour employee is full time if the period of time is consistent with the timeframe permitted for such determinations under Code Section 4980H. In such circumstances, the time period for determining whether an employee is full time will not be considered to avoid the 90-day waiting period limitation if coverage can become effective no later than 13 months from C’s start date, plus the time remaining until the first day of the next calendar month.