Extension for “Orientation Period”
With plan years beginning 1/1/2015 and after, the government clarified when employers may be able to extend the date of benefits eligibility further. For example, you do not need to include prior employment days in your benefits waiting period when:
- An employee enters a new job class that would newly allow him to be eligible for benefits;
- A job-related license is obtained, and that license is required and specified in your plan’s eligibility terms;
- An employee is satisfying a reasonable and bona fide employment-based orientation period.
The government specifically defines a “reasonable” orientation period as being no greater than one calendar month. For example, if a person begins work on January 6th, their orientation period must end before February 6th. For months where there is no corresponding day, you need to use the last day of that month; for example, if a person begins work on May 31st, their orientation period must end on or before June 30th.
Large Employers (50+ FTE) Beware A large employer that is subject to the “Pay or Play” mandate needs to be cautious of their orientation period + waiting period. If these combined periods run too long, a penalty could be imposed for the initial month of coverage not provided.
To avoid a penalty, yet push the coverage start date out as long as possible (through waiting periods and/or orientation periods), large employers would need to use one of these two options:
- If you have “1st of the month following 60 days” as your waiting period, you can add a 1 month orientation period, OR
- If you have a waiting period set where benefits would begin on the 91st day of employment, you cannot add an orientation period.