Welfare Benefit Plan ERISA News
October 2014

 
New 1 Month Orientation & 90 Day Waiting Periods
For plan years beginning in 2015, employers may require an employee to satisfy a one-month orientation/evaluation period in addition to a 90 day waiting period before he or she becomes eligible for benefits. The orientation period must be a reasonable and bonafide employment-based condition of eligibility in a position that is otherwise eligible for coverage and not a deliberate attempt to avoid the 90-day maximum waiting period. This period must be used for the employee and the employer to evaluate each other and to engage in orientation and training. This applies to grandfathered and non-grandfathered plans alike, as well as to self-insured and insured plans.
The orientation period starts on the employee's start date, and all calendar days count, including weekends and holidays. One month is determined by adding one calendar month to the employee's start date and subtracting one day. For example, if an employee starts working on May 3, the last permitted day of the orientation period is June 2. Special rules apply if there is not a corresponding date in the next calendar month.
While an employee could conceivably be on the payroll for 120 days before becoming eligible for benefits, the maximum waiting period is still considered to be 90 days, because it does not begin until the day following completion of the orientation period.
Large employers should be aware that utilizing a one-month orientation period and a 90-day waiting period could cause them to be in violation of the employer play-or-pay mandate. The play-or pay mandate requires an employee to be covered by the first day of the fourth full calendar month of employment. For example, an employee who starts work on January 6 must be covered by May 1. If the employer starts coverage on May 6--one month plus 90 days after the date of hire--it would be in compliance with the 90 day requirement, but in violation of the play-or-pay mandate.
There are other implementation details to be aware of, and employers should get expert benefit advice in order to ensure compliance with these rules.
8 Things Shared Responsibility Does Not Say
"So much energy has been spent on what the final regulations on the employer shared responsibility tax and the related final reporting regulations (the "ESRR") [say], that some of the most significant considerations have been missed because people have focused on the complex details and have not focused on what these regulations do not say or require. Sometimes what is not said is as important as or more important than what is said. This is intended to dispel some myths circulating and encourage everyone to take a step back and remember the big picture of the employer shared responsibility tax and related reporting rules." Read the full article at Winstead, PC.
New Election Changes Permitted for Cafeteria Plans
The IRS announced two new situations in which a participant may revoke his or her cafeteria plan election in order to purchase coverage through a competitive marketplace (Exchange) established under the ACA. These provisions do not apply to FSAs. See IRS Notice 2014-55 for details.
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© 2017 ERISAPros, LLC, All rights reserved. Information on ERISAPros' website, its newsletter, “News & Views,” and its blog, “ERISA Wonk,” is published as a general informational source. Information and articles are general in nature and are not intended to constitute legal or tax advice in any particular matter. Blog posts and comments reflect the personal views of their respective authors - not those of ERISAPros. Transmission of this information does not create an attorney-client relationship. ERISAPros, LLC is not a law firm and is not giving legal or tax advice. It does not warrant and is not responsible for errors or omissions in the content on its website or in its newsletters. ERISA is a complicated and confusing law. Summary Plan Descriptions (SPDs), Wrap Plan Documents, and Form 5500s require review and updating by qualified ERISA compliance professionals.

 

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