90 Day Limitation on Waiting Periods for Group Health Plans

Due to health care reform, effective January 1st, 2014, a group health plan may not use a waiting period that exceeds 90 days. A waiting period is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible for the plan can become effective. Being eligible for coverage means having met the plan’s eligibility conditions (such as being in an eligible job classification).

What the 90 Day Waiting Period Limitation Means for Group Health Plans

Starting January 1st, 2014, under PHS Act Section 2708, eligibility conditions that are based solely on the lapse of a time period are permissible for no more than 90 days. Other conditions for eligibility under the terms of a group health plan are generally permissible, unless the condition is designed to avoid compliance with the 90-day waiting period limitation.

If, under the terms of a plan, an employee may elect coverage that would begin on a date that does not exceed the 90-day waiting period limitation, the 90-day waiting period limitation is considered satisfied. Thus, a group health plan will not be considered to have violated PHS Act section 2708 merely because employees take additional time to elect coverage.

What Happens if a Group Health Plan Does Not Comply with the 90-day Waiting Period Limitation?

Violations by group health plans are subject to the excise tax under §4980D of the Code, as well as other civil enforcement remedies under ERISA and the PHS Act.

Frequently Asked Questions (FAQs) Regarding the 90-day Waiting Period Limitation

IRS Notice 2012-17 provides answers to a few FAQs:

When PHS Act section 2708 (which imposes a 90-day limitation on waiting periods)becomes effective in 2014, will it require an employer to offer coverage to part-time employees or to any other particular category of employees?

No. Many employers make distinctions in eligibility for coverage based on full-time or
part-time status, as defined by the employer’s group health plan (which may differ from the
standard under Code section 4980H). PHS Act section 2708 does not require the employer to
offer coverage to any particular employee or class of employees, including part-time employees. PHS Act section 2708 merely prohibits requiring an otherwise eligible employee to wait more than 90 days before coverage is effective. Furthermore, nothing in the Affordable Care Act penalizes small employers for choosing not to offer coverage to any employee, or large employers for choosing to limit their offer of coverage to full-time employees, as defined in the employer shared responsibility provisions.

How do the Departments intend to address the application of the 90-day waiting period limitation in PHS Act section 2708 to an offer of coverage by an employer?

Having reviewed the comments in response to IRS Notice 2011-36, the Departments intend to retain, for purposes of PHS Act section 2708, the definition in existing regulations that the 90-day waiting period begins when an employee is otherwise eligible for coverage under the terms of the group health plan. This is the definition of waiting period used for purposes of Title XXVII of the PHS Act, Part 7 of ERISA, and chapter 100 of the Code. Under this approach, if a plan were to provide that full-time employees are eligible for coverage without satisfying any other condition, and an employee were hired as a full-time employee, the waiting period (if the employer were to choose to impose one) for that employee would begin on the date of hire and could not exceed 90 days. Consistent with PHS Act section 2708, eligibility conditions that are based solely on the lapse of a time period would be permissible for no more than 90 days.

Other conditions for eligibility under the terms of a group health plan would generally be permissible under PHS Act section 2708, unless the condition is designed to avoid compliance with the 90-day waiting period limitation. For example, eligibility conditions such as full-time status, a bona fide job category, or receipt of a license would be permissible.

The upcoming guidance under section 2708 is also expected to address situations in which, under the terms of an employer’s plan, employees (or certain classes of employees) are eligible for coverage once they complete a specified cumulative number of hours of service within a specified period (such as 12 months). It is anticipated that, under the upcoming guidance, such eligibility conditions will not be treated as designed to avoid compliance with the 90-day waiting period limitation so long as the required cumulative hours of service do not exceed a number of hours to be specified in that guidance.

Additional Resources on the 90-day Waiting Period Limitation

• IRS Notice 2012-17
• IRS Notice 2011-36