Rules on 90-Day Waiting Period Limit and Identifying Full-Time Employees Released

On August 31, the Internal Revenue Service released two notices relating to key provisions for employers under the Patient Protection and Affordable Care Act (PPACA). The first, IRS Notice 2012-58, confirms and broadens the safe-harbor rules proposed in prior guidance for determining who are full-time employees (FT employees) under the large-employer shared responsibility provisions of Internal Revenue Code (Code) section 4980H, under which employers may become subject to penalties for failure to provide health plan coverage. Notice 2012-58 also provides for an administrative “protection” period that allows employers time to enroll newly-eligible FT employees without becoming subject to a penalty under Code section 4980H, as well as a process for transitioning between the methods for determining full-time status for new employees and ongoing employees.

The safe-harbor rules under Notice 2012-58 are coordinated with the rules in the second IRS notice, Notice 2012-59, relating to the 90-day waiting period limit for group health plan participation under Public Health Service Act (PHSA) section 2708. Notice 2012-59 is part of a joint effort by the tri-agency task force1 to issue guidance, and it was issued in substantially similar form by the Department of Labor (as Technical Release No. 2012-02), and the Department of Health and Human Services on the same date.

This Legal Alert describes key aspects of IRS Notices 2012-58 and 2012-59, first addressing the 90-day waiting period limit. It also provides background on previously-issued guidance under Code section 4980H and PHSA section 2708 and how that guidance coordinates with the new rules. Employers can rely on the guidance in the two new IRS notices, as well as the guidance previously issued in IRS Notices 2011-36, 2011-73 and 2012-17 to the extent it has not been superseded by the latest notices, through the end of 2014.