Employee benefits compliance is a common concern for businesses nationwide, especially as compliance-related laws and regulations often change yearly. Understanding the most up-to-date eligibility requirements and waiting period guidelines for employees to access their benefits can help businesses avoid potential penalties.
Understanding Eligibility Requirements of Employee Benefits
New hires often need clarification when they are told they are not eligible for health benefits immediately. Employers have the right to implement a waiting period before new employees can enroll in a group health plan. Still, this waiting period must be 90 days or less.
Defining Employee Benefits Eligibility Requirements
To receive benefits, employees must enroll during the designated enrollment period. An enrollment period generally occurs when an employee is hired and again, yearly, during annual open enrollment periods during which any employee can enroll or modify their benefits.
The exception is if an employee has a qualifying life event (QLE). Examples of a QLE include becoming newly married, having a baby, adopting a child, or losing eligibility for Medicaid or Medicare.
Common Eligibility Criteria for Employee Benefits
Eligibility criteria for enrolling in employee benefits can differ depending on the type of benefits. For example, employers may require eligible employees to work a certain number of hours per week or remain with the organization for a specific length of time before they can enroll in an employer-sponsored health plan.
Employees seeking retirement benefits, such as a 401(k) plan, may need to reach a minimum age, make a certain amount of contributions to the plan, or remain with the organization for a certain length of time before qualifying for employer contribution matching.
Other types of employee benefits, such as flexible work arrangements, paid time off (PTO), and wellness plans, may have their own eligibility criteria that employees must meet to participate. These criteria may relate to job classification, length of employment, or meeting specific performance metrics.
Legality of Orientation Periods on Top of Normal Waiting Periods
Final waiting period regulations allow employers to require new hires to complete a one-month orientation period before the eligibility waiting period starts for any employer-sponsored group health plan.
However, employers must meet compliance requirements relating to these orientation periods, which include amending their plan documents, employee handbooks, summary plan descriptions (SPDs), and other employee communications to specify that employees must satisfy both the orientation period and waiting period before becoming eligible for coverage.
Navigating Waiting Periods
Organizations implement waiting periods for various reasons, such as to prepare for government compliance or to offset financial costs. However, the main purpose of an employee waiting period is to determine whether or not an employee is a good fit for the company.
High turnover is common within the first few months of employment, and having a waiting period can help mitigate the cost of care for workers who may not stay with the company.
Types of Waiting Periods
There are two main types of waiting periods: pre-established waiting periods and post-established waiting periods.
- A pre-established waiting period is when a policyholder has a pre-established amount of time to use their benefits.
- A post-established waiting period is when employee benefits are made available once the policyholder is eligible to receive them.
Factors Influencing Waiting Period Determination
Several factors can influence the length of a waiting period, such as the types of benefits you are applying for. The most common benefits requiring a waiting period include:
- Health insurance
- Unemployment
- Disability
- PTO
Strategies for Staying Compliant
Plan administrators and other staff responsible for managing employee benefits have a fiduciary duty to act in the best interest of plan participants. Staying compliant with eligibility requirements and waiting periods for employees to access their benefits can protect organizations from fines, lawsuits, and government audits.
Establishing Clear Policies and Procedures
It’s important to keep employees up-to-date on the latest policies and procedures for handling benefits eligibility requirements and waiting periods. Explain what the waiting period is for preboarding or onboarding new hires. In addition, the waiting period in the employee handbook must be clearly defined.
Effective Communication with Employees
Communicating eligibility requirements and waiting period information with employees can help eliminate any confusion or concerns that workers may have about when they can access their benefits.
Set expectations early on, ideally before or when a job candidate is hired, to help prevent misunderstandings of what employees can expect after enrollment.
Consider New City for Employee Benefits Compliance Assistance
A comprehensive employee benefits package is an excellent way to attract and retain talent. However, problems can occur when organizations do not take the proper steps to ensure compliance with eligibility requirements and waiting periods for employees to access their benefits.
At New City Insurance, we work directly with businesses to help them stay compliant and gain peace of mind. Please call us at 888.210.2765 to get started.