On June 25, the Internal Revenue Service, Centers for Medicare & Medicaid Services, and Employee Benefits Security Administration, published final regulations clarifying the maximum allowed length of a reasonable and bona fide employment-based orientation period. Specifically, the regulations permit employers to impose a one-month orientation period on employees’ enrollment in their group health plans in addition to the 90-day waiting period.

The new regulations provide relief from the Affordable Care Act’s (ACA) prohibition on employers imposing a waiting period longer than 90 days for all individuals that are eligible to participate in the plan, for all plan years beginning on or after January 1, 2014. The ACA’s waiting period requirement states that coverage must be available to otherwise eligible employees by the 91st calendar day (including weekends and holidays) following plan eligibility. A “waiting period” is defined as the period that must pass before coverage for an otherwise eligible employee or dependent is able to enroll in the employer’s group health plan. And, an employee or dependent is “otherwise eligible” for plan participation if they have met all the employer’s eligibility conditions.

The 30-day orientation period allows employers to define their plan entry date for new employees as the first day of the month following 90 days of employment, so long as their administrative waiting period is not over 30 days, giving employers 90 days to enroll employees plus up to 30 days for orientation purposes.

The last permitted day of the orientation period is determined by adding one calendar month to the employee’s start date and subtracting one day from that date. If there is not a corresponding date in the next calendar month the last permitted day of the orientation period is the law day of the next calendar month. For example, if an employee had a start date of June 7, the last permitted day of the orientation period would be July 6. Or if the employee had a start date of January 30, the last permitted day of orientation would be February 28 (February 29 in a leap year).

But the regulations note that the one-month waiting period does not relieve large employers (those employers that employed over 50 employees) from compliance with the shared responsibility rule under section 4980H of the Internal Revenue Code. Section 4980H’s shared responsibility rule requires that employers offer affordable minimum value coverage to certain newly hired full-time employees by the first day of the fourth full calendar month of employment. Consequently, a large employer would not be able to impose the full 90 day waiting period and one-month orientation period without potentially failing to comply with the shared responsibility rule.

The regulations do not provide much guidance as to what classifies as a reasonable and bona fide “orientation period. The regulations explain that “[o]rientation periods are commonplace and the Departments do not intend to call into question the reasonable ness of short, bona fide orientation periods.” And, the purpose of the one-month waiting period is to evaluate whether the employment situation is satisfactory for the employer and employee, and during which orientation and training should take place. Despite the fact that the final regulations are vague on what constitutes a reasonable “orientation period,” prudent employers should develop a formal orientation policy, and document all training and/or orientations that occur during the orientation period. This will likely serve as adequate proof that the employer has a bona fide employment related orientation policy and is not attempting to delay health enrollment by an additional month. Additionally, if employers decide to implement a one-month orientation policy, they will need to adopt plan amendments and revise enrollment and plan materials to communicate the policy to all employees.