Benefits and Compensation, HR Management & Compliance, Recruiting

Ask the Expert: Rehire Waiting Period?

In our latest installment of Ask the Expert, brought to you by the team of industry experts at HR Hero®, we look at a recent question from a subscriber who is looking to rehire a former employee and would like to understand if the same waiting period rule applies as with a new employee.

Q: What are the rules for the new hire waiting period if I rehire someone?

rehire employee ACA

A: Under the Affordable Care Act (ACA) waiting period rule (29 CFR § 2590.715-2708(d)), “a plan or issuer may treat an employee whose employment has terminated and who then is rehired as newly eligible upon rehire and, therefore, required to meet the plan’s eligibility criteria and waiting period anew, if reasonable under the circumstances.” The termination and rehire must not be a “subterfuge” to avoid complying with the 90-day waiting period limitation.

The rule gives the example of someone who retires, then is rehired 3 months later to help train his replacement. In this case, a new waiting period (up to 90 days) is allowed. There is no minimum waiting period, and many employers choose to waive the benefits waiting period entirely. However, this practice should be applied consistently and equally across the board.

Note also that if the employer is an applicable large employer (50+ full-time employees or their equivalents), the ACA “break in service” rules come into play. Under the employer mandate rules, an employee in a waiting period is not considered to have been “offered” health coverage, but a waiting period is treated as a “limited non-assessment period” during which the employer is not subject to shared responsibility penalties.

However, this non-assessment period can only be applied once within a given “period of employment.” Therefore, unless a “break in service” has occurred, the applicable larger employer (ALE) will not get a second “bite” at a non-assessment period and may face Section 4980H penalties if coverage is not offered for these months (26 CFR 54.4980H-3(c)(2), (d)(2)).

It is considered a break in service if an employee returns to work after at least 13 weeks during which no hours were credited (26 weeks for educational employees). The same applies if the break in service is at least 4 weeks and is longer than the employee was previously employed (26 CFR 54.4980H-3(c)(4), (d)(6)).

Ask the Expert is a service provided to subscribers of BLR®’s HR Hero product, where experts are ready with answers to your organization’s unique questions surrounding HR compliance. To learn more and request a demo of HR Hero, click here.