Topel Forman News

]

Today’s Employer Topic – March 1, 2019

Imposing health care plan waiting periods on rehired employees


It’s not uncommon for employers in some industries and localities to occasionally rehire a previously terminated employee. Should such a situation occur, you may wonder how to properly handle the waiting period typically imposed on new hires preceding their eligibility for health care benefits. The answer depends on the status of your organization under the Affordable Care Act (ACA).

Smaller organizations

Let’s say you’re a smaller business not subject to the ACA’s employer shared-responsibility provision and you sponsor a group health plan under which full-time employees are eligible for coverage after a 90-day waiting period. (That’s the maximum duration allowed under the ACA.)

Generally, former employees who are terminated and rehired may be treated as newly eligible for coverage upon rehire. This means that your plan may require such individuals to meet the plan’s eligibility criteria and satisfy the plan’s waiting period anew.

But regulations specify that imposition of the waiting period must be reasonable under the circumstances. For example, the termination and rehire cannot be a subterfuge to avoid compliance with the 90-day waiting period limitation.

Important gaps

The regulations don’t elaborate on what’s required for a new waiting period upon rehire to be “reasonable under the circumstances” and not a “subterfuge.” They do, however, include an example in which the terminating employee had “no expectation of providing further services” and the gap between the termination date and the rehire date was approximately three months.

Under that scenario, the regulations permit the employee to be treated as newly eligible for coverage under the plan upon rehire, allowing the imposition of the plan’s waiting period. This suggests that there shouldn’t be a prearranged understanding that the terminating employee will return to employment.

In addition, there should be a sufficient period between the termination date and the rehire date. For instance, applying a new waiting period to an employee who terminates on a Friday and is rehired on the following Monday likely wouldn’t be considered reasonable under the circumstances.

Large employers

Applicable large employers (ALEs) that are subject to the ACA’s employer shared-responsibility provision should keep in mind that the rules for ALEs require some returning employees to be deemed continuing employees even after relatively lengthy absences.

Thus, even though the waiting period rules may allow a new waiting period for a rehired employee, implementing a waiting period for an employee who must be treated as a continuing full-time employee under the ACA’s “play or pay” provision could expose an ALE to penalties.

Compliant reintegration

Not every termination is forever. Many industries have skilled labor shortages and busy seasons that may drive an employer to rehire an employee who was recently let go. Contact us for further information on how to stay in compliance when reintegrating such employees into your health care benefits program.

© 2019

If you have questions, please reach out to your Topel Forman contact.

 

Related News Posts

Stories From Women In Accounting

Stories From Women In Accounting

For International Women’s Day and Women’s History Month our Women’s Employee Resource Group and our DEI Committee hosted a panel featuring six of our professionals from tax, audit and operations. They had an inspiring and insightful conversation about their unique experiences navigating motherhood, external and self-made expectations, and being able to maintain a balanced life. Here are some highlights from our discussion: 

read more
Proposed Legislation: The Tax Relief for American Families and Workers Act of 2024

Proposed Legislation: The Tax Relief for American Families and Workers Act of 2024

On January 19, 2024, the Ways and Means Committee of the House of Representatives successfully propelled HR 7024 forward, known as the “Tax Relief for American Families and Workers Act of 2024.” The bill is the outcome of an agreement established earlier that week between the Ways and Means Committee’s Chairman Smith and the Senate Finance Committee’s Chairman Wyden.

read more
The standard business mileage rate will be going up slightly in 2024

The standard business mileage rate will be going up slightly in 2024

The optional standard mileage rate used to calculate the deductible cost of operating an automobile for business will be going up by 1.5 cents per mile in 2024. The IRS recently announced that the cents-per-mile rate for the business use of a car, van, pickup or panel truck will be 67 cents (up from 65.5 cents for 2023).

read more