35942 Federal Register / Vol. 79, No. 122 / Wednesday, June 25, 2014 / Rules and Regulations 

opposed to this implementation notice. 

In the interim, a unit under HAP 

contract must be re-inspected at least 

biennially, through either the regular 

inspection process or the alternative 

inspection method. 

C. Extremely Low-Income 

Section 238 of the 2014 

Appropriations Act amends section 3 of 

the 1937 Act (42 U.S.C. 1437a) to add 

a definition of extremely low-income 

(ELI) families. ELI families are defined 

as very low–income families whose 

incomes do not exceed the higher of the 

Federal poverty level or 30 percent of 

Area Median Income. This provision 

affects the ELI targeting requirements in 

section 16 of the 1937 Act (42 U.S.C. 

1437n) for the public housing, housing 

choice voucher (HCV), project-based 

voucher (PBV), and multifamily projectbased section 8 programs. As of the 

effective date of this notice, compliance 

with the targeting requirements under 

each of these programs must take into 

account the new definition of ELI. 

Beginning with the effective date of 

this notice, a PHA or HUD, if HUD is the 

contract administrator, shall meet its 

targeting requirements through a 

combination of ELI admissions prior to 

the effective date (using the old 

definition) and ELI admissions after the 

effective date (using the new statutory 

definition). Neither a PHA nor HUD 

may skip over a family on the waiting 

list if that family meets the new 

definition of ELI as enacted by this 

section. 

For the public housing program, not 

less than 40 percent of the units that 

become available per PHA fiscal year 

must be made available for occupancy 

by ELI families. 

For the HCV and PBV programs, 

compliance with targeting requirements 

is determined for each of the PHA’s 

fiscal years based on new admissions to 

both programs (i.e., a single, combined 

total). Not less than 75 percent of such 

admissions shall be ELI families. 

For the multifamily project-based 

section 8 programs, the contract 

administrator (i.e., HUD or a PHA under 

an Annual Contributions Contract with 

HUD) must make available for 

occupancy by ELI families not less than 

40 percent of the section 8-assisted 

dwelling units that become available for 

occupancy in any fiscal year. 

The following example clarifies how 

a PHA administering the HCV and PBV 

programs would comply with this 

provision: A PHA with a fiscal year end 

of December 31 shall consider 

admissions to the HCV and PBV 

programs from January 1 up until the 

effective date of this notice using the old 

definition; from the effective date of this 

notice through December 31, it shall 

consider admissions using the new 

definition. To further illustrate, assume 

the PHA admitted 50 families into their 

HCV program between January 1 and 

the effective date of this notice. Forty 

families were ELI (under the old 

definition), 6 families did not meet the 

old definition of ELI but would have 

met the new definition of ELI had it 

been implemented at the time of their 

admission, and 4 did not meet either 

definition of ELI. In terms of calculating 

the ELI targeting requirement for the 

period of the PHA fiscal year prior to 

implementation of the change in the ELI 

definition, only 40 families met the ELI 

definition with regard to the targeting 

requirement (not 46). Assume the PHA 

admitted another 50 families before the 

end of the PHA fiscal year and 45 of 

those families met the new definition of 

ELI. The total number of families that 

met the ELI requirement for the PHA 

fiscal year would be 85 (40 plus 45), or 

85 percent. 

In some communities, the extremely 

low-income and very low-income levels 

will be identical for some or all 

household sizes, in which case PHAs 

meet their ELI targeting requirements by 

serving VLI households, since those 

families meet the new definition of ELI. 

To reduce the work a PHA or contract 

administrator must do to determine 

which standard it should be using, 

HUD’s Office of Policy Development 

and Research has calculated the new 

income limits for extremely low-income 

families, taking the previous sentence 

into account, and has made the new 

area income limits available online at 

http://www.huduser.org/portal/

datasets/il/il14/index.html. 

D. Utility Allowances 

Section 242 of the 2014 

Appropriations Act limits the utility 

allowance payment for tenant-based 

vouchers to the family unit size for 

which the voucher is issued, 

irrespective of the size of the unit rented 

by the family, with an exemption for 

families with a person with disabilities. 

Under section 242, the utility 

allowance for a family shall be the lower 

of: (1) The utility allowance amount for 

the family unit size; or (2) the utility 

allowance amount for the unit size of 

the unit rented by the family. However, 

upon the request of a family that 

includes a person with disabilities, the 

PHA must approve a utility allowance 

higher than the applicable amount if 

such a higher utility allowance is 

needed as a reasonable accommodation 

in accordance with HUD’s regulations in 

24 CFR part 8 to make the program 

accessible to and usable by the family 

member with a disability. This 

provision applies only to vouchers 

issued after the effective date of this 

notice and to current program 

participants. For current program 

participants, a PHA must implement the 

new allowance at the family’s next 

annual reexamination, provided that the 

PHA is able to provide a family with at 

least 60 days’ notice prior to the 

reexamination. 

Dated: June 12, 2014. 

Carol J. Galante, 

Assistant Secretary for Housing—Federal 

Housing Commissioner. 

Milan Ozdinec, 

Deputy Assistant Secretary for the Office of 

Public Housing and Voucher Program. 

[FR Doc. 2014–14915 Filed 6–24–14; 8:45 am] 

BILLING CODE 4210–67–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 54 

[TD 9671] 

RIN 1545–BL97 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2590 

RIN 1210–AB61 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

45 CFR Part 147 

[CMS–9952–F2] 

RIN 0938–AR77 

Ninety-Day Waiting Period Limitation 

AGENCY: Internal Revenue Service, 

Department of the Treasury; Employee 

Benefits Security Administration, 

Department of Labor; Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services. 

ACTION: Final rules. 

SUMMARY: These final regulations clarify 

the maximum allowed length of any 

reasonable and bona fide employmentbased orientation period, consistent 

with the 90-day waiting period 

limitation set forth in section 2708 of 

the Public Health Service Act, as added 

by the Patient Protection and Affordable 

Care Act (Affordable Care Act), as 


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Federal Register / Vol. 79, No. 122 / Wednesday, June 25, 2014 / Rules and Regulations 35943 

1The term ‘‘group health plan’’ is used in title 

XXVII of the PHS Act, part 7 of ERISA, and chapter 

100 of the Code, and is distinct from the term 

‘‘health plan,’’ as used in other provisions of title 

I of the Affordable Care Act. The term ‘‘health plan’’ 

does not include self-insured group health plans. 

2Note, however, that in the Economic Analysis 

and Paperwork Burden section of this preamble, in 

sections under headings listing only two of the 

three Departments, the term ‘‘Departments’’ 

generally refers only to the two Departments listed 

in the heading. 3 26 CFR 54.9801–3(a)(3)(iii), 29 CFR 2590.701– 

3(a)(3)(iii), and 45 CFR 146.111(a)(3)(iii). 4 Department of Labor Technical Release 2012– 

01, IRS Notice 2012–17, and HHS FAQs issued 

February 9, 2012. 

5 Department of Labor Technical Release 2012– 

02, IRS Notice 2012–59, and HHS FAQs issued 

August 31, 2012. 

amended, and incorporated into the 

Employee Retirement Income Security 

Act of 1974 and the Internal Revenue 

Code. 

DATES: Effective date. These final 

regulations are effective on August 25, 

2014. 

Applicability date. These final 

regulations apply to group health plans 

and group health insurance issuers for 

plan years beginning on or after January 

1, 2015. 

FOR FURTHER INFORMATION CONTACT: 

Amy Turner or Elizabeth Schumacher, 

Employee Benefits Security 

Administration, Department of Labor, at 

(202) 693–8335; Karen Levin, Internal 

Revenue Service, Department of the 

Treasury, at (202) 317–6846; or Cam 

Moultrie Clemmons, Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, at (410) 786–1565. 

Customer service information: 

Individuals interested in obtaining 

information from the Department of 

Labor concerning employment-based 

health coverage laws may call the EBSA 

Toll-Free Hotline at 1–866–444–EBSA 

(3272) or visit the Department of Labor’s 

Web site (www.dol.gov/ebsa). In 

addition, information from HHS on 

private health insurance for consumers 

can be found on the Centers for 

Medicare & Medicaid Services (CMS) 

Web site (www.cciio.cms.gov/) and 

information on health reform can be 

found at www.HealthCare.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Patient Protection and Affordable 

Care Act, Public Law 111–148, was 

enacted on March 23, 2010, and the 

Health Care and Education 

Reconciliation Act, Public Law 111– 

152, was enacted on March 30, 2010. 

(They are collectively known as the 

‘‘Affordable Care Act’’.) The Affordable 

Care Act reorganizes, amends, and adds 

to the provisions of part A of title XXVII 

of the Public Health Service Act (PHS 

Act) relating to group health plans and 

health insurance issuers in the group 

and individual markets. The term 

‘‘group health plan’’ includes both 

insured and self-insured group health 

plans.1 The Affordable Care Act adds 

section 715(a)(1) to the Employee 

Retirement Income Security Act (ERISA) 

and section 9815(a)(1) to the Internal 

Revenue Code (the Code) to incorporate 

the provisions of part A of title XXVII 

of the PHS Act into ERISA and the 

Code, and to make them applicable to 

group health plans and health insurance 

issuers providing health insurance 

coverage in connection with group 

health plans. The PHS Act sections 

incorporated by these references are 

sections 2701 through 2728. 

PHS Act section 2708, as added by the 

Affordable Care Act and incorporated 

into ERISA and the Code, provides that 

a group health plan or health insurance 

issuer offering group health insurance 

coverage shall not apply any waiting 

period (as defined in PHS Act section 

2704(b)(4)) that exceeds 90 days. PHS 

Act section 2704(b)(4), ERISA section 

701(b)(4), and Code section 9801(b)(4) 

define a waiting period to be the period 

that must pass with respect to an 

individual before the individual is 

eligible to be covered for benefits under 

the terms of the plan. In 2004 

regulations implementing the Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

portability provisions (2004 HIPAA 

regulations), the Departments of Labor, 

Health and Human Services (HHS), and 

the Treasury (the Departments 2) defined 

a waiting period to mean the period that 

must pass before coverage for an 

employee or dependent who is 

otherwise eligible to enroll under the 

terms of a group health plan can become 

effective.3 PHS Act section 2708 does 

not require an employer to offer 

coverage to any particular individual or 

class of individuals, including part-time 

employees. PHS Act section 2708 

prevents an otherwise eligible 

individual from being required to wait 

more than 90 days before coverage 

becomes effective. PHS Act section 2708 

applies to both grandfathered and nongrandfathered group health plans and 

group health insurance coverage for 

plan years beginning on or after January 

1, 2014. 

On February 9, 2012, the Departments 

issued guidance 4 outlining various 

approaches under consideration with 

respect to both the 90-day waiting 

period limitation and the employer 

shared responsibility provisions under 

Code section 4980H (February 2012 

guidance) and requested public 

comment. On August 31, 2012, 

following their review of the comments 

on the February 2012 guidance, the 

Departments provided temporary 

guidance,5 to remain in effect at least 

through the end of 2014, regarding the 

90-day waiting period limitation, and 

described the approach they intended to 

propose in future rulemaking (August 

2012 guidance). After consideration of 

all of the comments received in 

response to the February 2012 guidance 

and August 2012 guidance, the 

Departments issued proposed 

regulations on March 21, 2013 (78 FR 

17313). After consideration of 

comments on the proposed regulations, 

the Departments published final 

regulations on February 24, 2014 (79 FR 

10295). 

Under the final regulations, a group 

health plan and a health insurance 

issuer offering group health insurance 

coverage may not apply any waiting 

period that exceeds 90 days. The 

regulations define ‘‘waiting period’’ as 

the period that must pass before 

coverage for an employee or dependent 

who is otherwise eligible to enroll under 

the terms of a group health plan can 

become effective. Being otherwise 

eligible to enroll in a plan means having 

met the plan’s substantive eligibility 

conditions (such as, for example, being 

in an eligible job classification, 

achieving job-related licensure 

requirements specified in the plan’s 

terms, or satisfying a reasonable and 

bona fide employment-based orientation 

period). 

Contemporaneous with the 

publication of the final regulations, the 

Departments published proposed 

regulations (79 FR 10319) to address 

orientation periods under the 90-day 

waiting period limitation of PHS Act 

section 2708 and solicit comment before 

promulgation of final regulations on this 

specific issue. The proposed regulations 

provided that one month would be the 

maximum allowed length of any 

reasonable and bona fide employmentbased orientation period. The 

Departments stated that, during an 

orientation period, they envisioned that 

an employer and employee could 

evaluate whether the employment 

situation was satisfactory for each party, 

and standard orientation and training 

processes would begin. Under the 

proposed regulations, if a group health 

plan conditions eligibility on an 

employee’s having completed a 

reasonable and bona fide employmentbased orientation period, the eligibility 

condition would not be considered to be 


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35944 Federal Register / Vol. 79, No. 122 / Wednesday, June 25, 2014 / Rules and Regulations 

6The final regulations also note that a plan or 

issuer that imposes a 90-day waiting period may, 

for administrative convenience, choose to permit 

coverage to become effective earlier than the 91st 

day if the 91st day is a weekend or holiday. 

designed to avoid compliance with the 

90-day waiting period limitation if the 

orientation period did not exceed one 

month and the maximum 90-day 

waiting period would begin on the first 

day after the orientation period. 

Many commenters were generally 

supportive of the proposed rule. 

Commenters agreed that a limitation on 

the length of an orientation period of 

one month was appropriate and also 

agreed with the proposal that 

determining whether an orientation 

period is ‘‘reasonable’’ and ‘‘bona fide’’ 

should be a facts and circumstances 

analysis. Some commenters urged the 

Departments to clarify the interplay 

between the 90-day waiting period 

provision and the employer shared 

responsibility provisions. 

After consideration of the comments 

and feedback received from 

stakeholders, the Departments are 

publishing these final regulations that 

incorporate the proposed regulations 

without any substantive changes. 

II. Overview of the Final Regulations 

The final regulations implementing 

PHS Act section 2708 set forth rules 

governing the relationship between a 

plan’s eligibility criteria and the 90-day 

waiting period limitation. Specifically, 

the final regulations provide that being 

otherwise eligible to enroll in a plan 

means having met the plan’s substantive 

eligibility conditions (for example, 

being in an eligible job classification, 

achieving job-related licensure 

requirements specified in the plan’s 

terms, or satisfying a reasonable and 

bona fide employment-based orientation 

period). Under the final regulations, 

after an individual is determined to be 

otherwise eligible for coverage under 

the terms of the plan, any waiting 

period may not extend beyond 90 days, 

and all calendar days are counted 

beginning on the enrollment date, 

including weekends and holidays.6

Orientation periods are commonplace 

and the Departments do not intend to 

call into question the reasonableness of 

short, bona fide orientation periods. The 

danger of abuse increases, however, as 

the length of the period expands. 

Accordingly, the final regulations 

provide that one month is the maximum 

allowed length of an employment-based 

orientation period. The creation of a 

clear maximum prevents abuse and 

facilitates compliance. 

During an orientation period, the 

Departments envision that an employer 

and employee will evaluate whether the 

employment situation is satisfactory for 

each party, and standard orientation and 

training processes will begin. For any 

period longer than one month that 

precedes a waiting period, the 

Departments refer back to the general 

rule, which provides that the 90-day 

period begins after an individual is 

otherwise eligible to enroll under the 

terms of a group health plan. While a 

plan may impose substantive eligibility 

criteria, such as requiring the worker to 

fit within an eligible job classification or 

to achieve job-related licensure 

requirements, it may not impose 

conditions that are mere subterfuges for 

the passage of time. 

Under these final regulations, one 

month would be determined by adding 

one calendar month and subtracting one 

calendar day, measured from an 

employee’s start date in a position that 

is otherwise eligible for coverage. For 

example, if an employee’s start date in 

an otherwise eligible position is May 3, 

the last permitted day of the orientation 

period is June 2. Similarly, if an 

employee’s start date in an otherwise 

eligible position is October 1, the last 

permitted day of the orientation period 

is October 31. If there is not a 

corresponding date in the next calendar 

month upon adding a calendar month, 

the last permitted day of the orientation 

period is the last day of the next 

calendar month. For example, if the 

employee’s start date is January 30, the 

last permitted day of the orientation 

period is February 28 (or February 29 in 

a leap year). Similarly, if the employee’s 

start date is August 31, the last 

permitted day of the orientation period 

is September 30. If a group health plan 

conditions eligibility on an employee’s 

having completed a reasonable and bona 

fide employment-based orientation 

period, the eligibility condition is not 

considered to be designed to avoid 

compliance with the 90-day waiting 

period limitation if the orientation 

period does not exceed one month and 

the maximum 90-day waiting period 

begins on the first day after the 

orientation period. 

Compliance with these final 

regulations is not determinative of 

compliance with section 4980H of the 

Code, under which an applicable large 

employer may be subject to an 

assessable payment if it fails to offer 

affordable minimum value coverage to 

certain newly-hired full-time employees 

by the first day of the fourth full 

calendar month of employment. For 

example, an applicable large employer 

that has a one-month orientation period 

may comply with both PHS Act section 

2708 and Code section 4980H by 

offering coverage no later than the first 

day of the fourth full calendar month of 

employment. However, an applicable 

large employer plan may not be able to 

impose the full one-month orientation 

period and the full 90-day waiting 

period without potentially becoming 

subject to an assessable payment under 

Code section 4980H. For example, if an 

employee is hired as a full-time 

employee on January 6, a plan may offer 

coverage May 1 and comply with both 

provisions. However, if the employer is 

an applicable large employer and starts 

coverage May 6, which is one month 

plus 90 days after date of hire, the 

employer may be subject to an 

assessable payment under Code section 

4980H. 

These final regulations apply to group 

health plans and health insurance 

issuers for plan years beginning on or 

after January 1, 2015. Until these final 

rules are applicable, as stated in the 

preamble to the proposed rules, the 

Departments will consider compliance 

with the proposed regulations to 

constitute compliance with PHS Act 

section 2708. See 79 FR 10320, 10321 

(February 24, 2014). 

III. Economic Impact and Paperwork 

Burden 

A. Executive Order 12866 and 13563— 

Department of Labor and Department of 

Health and Human Services 

Executive Order 13563 emphasizes 

the importance of quantifying both costs 

and benefits, of reducing costs, of 

harmonizing and streamlining rules, 

and of promoting flexibility. It also 

requires Federal agencies to develop a 

plan under which the agencies will 

periodically review their existing 

significant regulations to make the 

agencies’ regulatory programs more 

effective or less burdensome in 

achieving their regulatory objectives. 

Under Executive Order 12866, a 

regulatory action deemed ‘‘significant’’ 

is subject to the requirements of the 

Executive Order and review by the 

Office of Management and Budget 

(OMB). Section 3(f) of the Executive 

Order defines a ‘‘significant regulatory 

action’’ as an action that is likely to 

result in a rule (1) having an annual 

effect on the economy of $100 million 

or more, or adversely and materially 

affecting a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local or tribal governments or 

communities (also referred to as 

‘‘economically significant’’); (2) creating 

serious inconsistency or otherwise 

interfering with an action taken or 

planned by another agency; (3) 


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Federal Register / Vol. 79, No. 122 / Wednesday, June 25, 2014 / Rules and Regulations 35945 

7 In section III of this preamble, some subsections 

have a heading listing one or two of the three 

Departments. In those subsections, the term 

‘‘Departments’’ generally refers only to the 

Departments listed in the heading. 

8 79 FR 10321. 

9This estimate is based upon internal Department 

of Labor calculations derived from the 2009 

Medical Expenditure Panel Survey. 

10See e.g., Kaiser Family Foundation and Health 

Research and Education Trust, Employer Health 

Benefits 2013 Annual Survey (2013) available at 

http://ehbs.kff.org/pdf/2013/8345.pdf. 

11Approximately 1.2 million private sector 

employees and 287,000 State and local public 

sector employees. 

12 79 FR 10295 (February 24, 2014). 

materially altering the budgetary 

impacts of entitlement grants, user fees, 

or loan programs or the rights and 

obligations of recipients thereof; or (4) 

raising novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. 

These final regulations are not 

economically significant within the 

meaning of section 3(f)(1) of the 

Executive Order. However, OMB has 

determined that the actions are 

significant within the meaning of 

section 3(f)(4) of the Executive Order. 

Therefore, OMB has reviewed these 

final regulations, and the Departments 7

have provided the following assessment 

of their impact. 

1. Summary 

As stated earlier in this preamble, 

these final regulations provide that one 

month is the maximum allowed length 

of any reasonable and bona fide 

employment-based orientation period. 

The final regulations generally apply to 

group health plans and group health 

insurance issuers for plan years 

beginning on or after January 1, 2015. 

The Departments have crafted these 

final regulations to secure the 

protections intended by Congress in an 

economically efficient manner. The 

Departments lack sufficient data to 

quantify the regulations’ economic cost 

or benefits. The preamble to the 

proposed rules implementing PHS Act 

section 2708, published 8 in the Federal 

Register on February 24, 2014 provided 

a qualitative discussion of economic 

impacts of clarifying the maximum 

allowed length of any reasonable and 

bona fide orientation period and 

requested detailed comment and data 

that would allow for quantification of 

the costs, benefits, and transfers 

associated with the term. The 

Departments received no comments 

providing additional data that would 

help it estimate the economic impacts of 

the final regulations. 

2. Estimated Number of Affected 

Entities 

The Departments estimate that 4.1 

million new employees receive group 

health insurance coverage through 

private sector employers and 1.0 million 

new employees receive group health 

insurance coverage through public 

sector employers annually.9 The 2013 

Kaiser Family Foundation and Health 

Research and Education Trust Employer 

Health Benefits Annual Survey (the 

‘‘2013 Kaiser Survey’’) finds that 30 

percent of covered workers were subject 

to waiting periods of three months or 

more.10 If 30 percent of new employees 

receiving health care coverage from 

their employers are subject to a waiting 

period of three months or more, then 1.5 

million new employees (5.1 million × 

0.30) would potentially be affected by 

these regulations.11 However, it is 

unlikely that the survey defines the term 

‘‘waiting period’’ in the same manner as 

the final regulations. For example, the 

term ‘‘waiting period’’ may have been 

defined by reference to an employee’s 

start date, not matching the definition in 

the final regulations. 

3. Benefits 

The final regulations implementing 

PHS Act section 2708 12 set forth rules 

governing the relationship between a 

plan’s eligibility criteria and the 90-day 

waiting period limitation. Specifically, 

the final regulations provide that being 

otherwise eligible to enroll in a plan 

means having met the plan’s substantive 

eligibility conditions (such as, for 

example, being in an eligible job 

classification, achieving job-related 

licensure requirements specified in the 

plan’s terms, or satisfying a reasonable 

and bona fide employment-based 

orientation period). These final 

regulations provide that one month is 

the maximum allowed length of any 

reasonable and bona fide employmentbased orientation period. This period of 

no longer than one month is intended to 

provide plan sponsors with flexibility to 

continue the common practice of 

utilizing a probationary or trial period to 

determine whether a new employee will 

be able to handle the duties and 

challenges of the job, while providing 

protections against excessive waiting 

periods for such employees. Under 

these final regulations, the plan’s 

waiting period must begin once the new 

employee satisfies the maximum one 

month orientation period requirement 

and the waiting period may not exceed 

90 days. 

4. Costs 

These final regulations extend the 

maximum amount of time between an 

employee beginning work and obtaining 

health care coverage relative to the time 

before the issuance of the final 

regulations implementing PHS Act 

section 2708 and these final regulations. 

If employees delay health care treatment 

until the expiration of the orientation 

period and waiting period, detrimental 

health effects could result, especially for 

low-wage employees and their 

dependents and those requiring higher 

levels of health care, such as those with 

chronic conditions. This could lead to 

lower work productivity and missed 

school days. However, the Departments 

anticipate that such effects may be 

limited because few employees are 

likely to be affected and it is anticipated 

that the inclusion of an orientation 

period will not result in most employees 

facing a full additional month between 

being hired and obtaining coverage. 

5. Transfers 

The possible transfers associated with 

these final regulations would arise when 

employers begin to pay their portion of 

premiums or contributions later than 

they did before the issuance of these 

final regulations. Recipients of the 

transfer would be employers who 

implement an orientation period in 

addition to the 90-day waiting period, 

thus delaying having to pay premiums. 

The source of the transfers would be 

covered employees who, after these 

final regulations become applicable, 

would have to wait longer between 

being employed and obtaining health 

coverage. During this period, affected 

employees might obtain an individual 

health insurance policy, purchase 

COBRA continuation coverage, or forgo 

health coverage—which could, 

depending on the policy, have higher 

out-of-pocket costs for their healthcare 

expenditures. 

The Departments expect these 

transfers to be minimal because under 

these final regulations, only a small 

number of employers would further 

effectively extend start date for coverage 

to their employees. That is because a 

relatively small fraction of workers have 

waiting periods that exceed three 

months; this rule does not create an 

incentive that is not in the system 

already. 

B. Regulatory Flexibility Act— 

Department of Labor and Department of 

Health and Human Services 

The Regulatory Flexibility Act (5 

U.S.C. 601 et seq.) (RFA) applies to most 

Federal rules that are subject to the 


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35946 Federal Register / Vol. 79, No. 122 / Wednesday, June 25, 2014 / Rules and Regulations 

notice and comment requirements of 

section 553(b) of the Administrative 

Procedure Act (5 U.S.C. 551 et seq.). 

Unless an agency certifies that such a 

rule will not have a significant 

economic impact on a substantial 

number of small entities, section 603 of 

the RFA requires the agency to present 

an initial regulatory flexibility analysis 

at the time of the publication of the 

notice of proposed rulemaking 

describing the impact of the rule on 

small entities. Small entities include 

small businesses, organizations and 

governmental jurisdictions. In 

accordance with the RFA, the 

Departments prepared an initial 

regulatory flexibility analysis at the 

proposed rule stage and requested 

comments on the analysis. No 

comments were received. Below is the 

Department’s final regulatory flexibility 

analysis and its certification that these 

final regulations do not have a 

significant economic impact on a 

substantial number of small entities. 

The Departments carefully considered 

the likely impact of the rule on small 

entities in connection with their 

assessment under Executive Order 

12866. The Departments lack data to 

focus only on the impacts on small 

business. However, the Departments 

believe that by providing small 

businesses with flexibility to design 

reasonable and bona fide employmentbased orientation periods, consistent 

with the 90-day waiting period 

limitation set forth in PHS Act section 

2708, the final regulations reduce the 

burden on such businesses to comply 

with the provision. Based on the 

foregoing, the Departments hereby 

certify that these final regulations will 

not have a significant economic impact 

on a substantial number of small 

entities. 

C. Special Analyses—Department of the 

Treasury 

For purposes of the Department of the 

Treasury, it has been determined that 

this final rule is not a significant 

regulatory action as defined in 

Executive Order 12866, as 

supplemented by Executive Order 

13563. Therefore, a regulatory 

assessment is not required. It has also 

been determined that section 553(b) of 

the Administrative Procedure Act (5 

U.S.C. chapter 5) does not apply to these 

final regulations, and, because these 

final regulations do not impose a 

collection of information requirement 

on small entities, a regulatory flexibility 

analysis under the Regulatory 

Flexibility Act (5 U.S.C. chapter 6) is 

not required. Pursuant to Code section 

7805(f), the proposed rule was 

submitted to the Small Business 

Administration for comment on its 

impact on small business. 

D. Paperwork Reduction Act 

This final rule is not subject to the 

requirements of the Paperwork 

Reduction Act of 1995 (PRA 95) (44 

U.S.C. 3501 et seq.), because it does not 

contain a collection of information as 

defined in 44 U.S.C. 3502(3). 

E. Congressional Review Act 

These final regulations are subject to 

the Congressional Review Act 

provisions of the Small Business 

Regulatory Enforcement Fairness Act of 

1996 (5 U.S.C. 801 et seq.) and will be 

transmitted to the Congress and the 

Comptroller General for review. 

F. Unfunded Mandates Reform Act 

For purposes of the Unfunded 

Mandates Reform Act of 1995 (Pub. L. 

104–4), as well as Executive Order 

12875, these final regulations do not 

include any Federal mandate that may 

result in expenditures by State, local, or 

tribal governments, or by the private 

sector, of $100 million or more adjusted 

for inflation. 

G. Federalism Statement—Department 

of Labor and Department of Health and 

Human Services 

Executive Order 13132 outlines 

fundamental principles of federalism, 

and requires the adherence to specific 

criteria by Federal agencies in the 

process of their formulation and 

implementation of policies that have 

‘‘substantial direct effects’’ on the 

States, the relationship between the 

national government and States, or on 

the distribution of power and 

responsibilities among the various 

levels of government. Federal agencies 

promulgating regulations that have 

these federalism implications must 

consult with State and local officials, 

and describe the extent of their 

consultation and the nature of the 

concerns of State and local officials in 

the preamble to the regulation. 

In the Departments’ view, these final 

regulations have federalism 

implications, because they have direct 

effects on the States, the relationship 

between the national government and 

States, or on the distribution of power 

and responsibilities among various 

levels of government. In general, 

through section 514, ERISA supersedes 

State laws to the extent that they relate 

to any covered employee benefit plan, 

and preserves State laws that regulate 

insurance, banking, or securities. While 

ERISA prohibits States from regulating a 

plan as an insurance or investment 

company or bank, the preemption 

provisions of ERISA section 731 and 

PHS Act section 2724 (implemented in 

29 CFR 2590.731(a) and 45 CFR 

146.143(a)) apply so that the HIPAA 

requirements (including those of the 

Affordable Care Act) are not to be 

‘‘construed to supersede any provision 

of State law which establishes, 

implements, or continues in effect any 

standard or requirement solely relating 

to health insurance issuers in 

connection with group health insurance 

coverage except to the extent that such 

standard or requirement prevents the 

application of a requirement’’ of a 

Federal standard. The conference report 

accompanying HIPAA indicates that 

this is intended to be the ‘‘narrowest’’ 

preemption of State laws. (See House 

Conf. Rep. No. 104–736, at 205, 

reprinted in 1996 U.S. Code Cong. & 

Admin. News 2018.) 

States may continue to apply State 

law requirements except to the extent 

that such requirements prevent the 

application of the Affordable Care Act 

requirements that are the subject of this 

rulemaking. State insurance laws that 

are more stringent than the Federal 

requirements are unlikely to ‘‘prevent 

the application of’’ the Affordable Care 

Act, and be preempted. Accordingly, 

States have significant latitude to 

impose requirements on health 

insurance issuers that are more 

restrictive than the Federal law. 

Guidance conveying this 

interpretation was published in the 

Federal Register on April 8, 1997 (62 FR 

16904), and December 30, 2004 (69 FR 

78720), and these final rules would 

clarify and implement the statute’s 

minimum standards and would not 

significantly reduce the discretion given 

the States by the statute. 

In compliance with the requirement 

of Executive Order 13132 that agencies 

examine closely any policies that may 

have federalism implications or limit 

the policy making discretion of the 

States, the Departments have engaged in 

efforts to consult with and work 

cooperatively with affected State and 

local officials, including attending 

conferences of the National Association 

of Insurance Commissioners and 

consulting with State insurance officials 

on an individual basis. 


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Federal Register / Vol. 79, No. 122 / Wednesday, June 25, 2014 / Rules and Regulations 35947 

Throughout the process of developing 

these final regulations, to the extent 

feasible within the specific preemption 

provisions of HIPAA as it applies to the 

Affordable Care Act, the Departments 

have attempted to balance the States’ 

interests in regulating health insurance 

issuers, and Congress’ intent to provide 

uniform minimum protections to 

consumers in every State. By doing so, 

it is the Departments’ view that they 

have complied with the requirements of 

Executive Order 13132. 

IV. Statutory Authority 

The Department of the Treasury 

regulations are adopted pursuant to the 

authority contained in sections 7805 

and 9833 of the Code. 

The Department of Labor regulations 

are adopted pursuant to the authority 

contained in 29 U.S.C. 1027, 1059, 1135, 

1161–1168, 1169, 1181–1183, 1181 note, 

1185, 1185a, 1185b, 1185d, 1191, 1191a, 

1191b, and 1191c; sec. 101(g), Public 

Law 104–191, 110 Stat. 1936; sec. 

401(b), Public Law 105–200, 112 Stat. 

645 (42 U.S.C. 651 note); sec. 512(d), 

Public Law 110–343, 122 Stat. 3881; sec. 

1001, 1201, and 1562(e), Public Law 

111–148, 124 Stat. 119, as amended by 

Public Law 111–152, 124 Stat. 1029; 

Secretary of Labor’s Order 3–2010, 75 

FR 55354 (September 10, 2010). 

The Department of Health and Human 

Services regulations are adopted 

pursuant to the authority contained in 

sections 2701 through 2763, 2791, and 

2792 of the PHS Act (42 U.S.C. 300gg 

through 300gg–63, 300gg–91, and 

300gg–92), as amended. 

List of Subjects 

26 CFR Part 54 

Excise taxes, Health care, Health 

insurance, Pensions, Reporting and 

recordkeeping requirements. 

29 CFR Part 2590 

Continuation coverage, Disclosure, 

Employee benefit plans, Group health 

plans, Health care, Health insurance, 

Medical child support, Reporting and 

recordkeeping requirements. 

45 CFR Part 147 

Health care, Health insurance, 

Reporting and recordkeeping 

requirements, and State regulation of 

health insurance. 

John Dalrymple, 

Deputy Commissioner for Services and 

Enforcement, Internal Revenue Service. 

Approved: June 18, 2014. 

Mark J. Mazur, 

Assistant Secretary of the Treasury (Tax 

Policy). 

Signed this 18th day of June, 2014. 

Phyllis C. Borzi, 

Assistant Secretary, Employee Benefits 

Security Administration, Department of 

Labor. 

Dated: June 19, 2014. 

Marilyn Tavenner, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: June 19, 2014. 

Sylvia Burwell, 

Secretary, Department of Health and Human 

Services. 

Department of the Treasury 

Internal Revenue Service 

26 CFR Chapter I 

Accordingly, 26 CFR part 54 is 

amended as follows: 

PART 54—PENSION EXCISE TAXES 

■ Paragraph 1. The authority citation 

for Part 54 continues to read in part as 

follows: 

Authority: 26 U.S.C. 7805. * * * 

Section 54.9815–2708 is also issued under 

26 U.S.C. 9833. 

* * * * * 

■ Par. 2. Section 54.9815–2708 is 

amended by adding paragraph (c)(3)(iii) 

and a new Example 11 in paragraph (f) 

to read as follows: 

§ 54.9815–2708 Prohibition on waiting 

periods that exceed 90 days. 

* * * * * 

(c) * * * 

(3) * * * 

(iii) Limitation on orientation periods. 

To ensure that an orientation period is 

not used as a subterfuge for the passage 

of time, or designed to avoid 

compliance with the 90-day waiting 

period limitation, an orientation period 

is permitted only if it does not exceed 

one month. For this purpose, one month 

is determined by adding one calendar 

month and subtracting one calendar 

day, measured from an employee’s start 

date in a position that is otherwise 

eligible for coverage. For example, if an 

employee’s start date in an otherwise 

eligible position is May 3, the last 

permitted day of the orientation period 

is June 2. Similarly, if an employee’s 

start date in an otherwise eligible 

position is October 1, the last permitted 

day of the orientation period is October 

31. If there is not a corresponding date 

in the next calendar month upon adding 

a calendar month, the last permitted day 

of the orientation period is the last day 

of the next calendar month. For 

example, if the employee’s start date is 

January 30, the last permitted day of the 

orientation period is February 28 (or 

February 29 in a leap year). Similarly, 

if the employee’s start date is August 31, 

the last permitted day of the orientation 

period is September 30. 

* * * * * 

(f) * * * 

Example 11. (i) Facts. Employee H begins 

working full time for Employer Z on October 

16. Z sponsors a group health plan, under 

which full time employees are eligible for 

coverage after they have successfully 

completed a bona fide one-month orientation 

period. H completes the orientation period 

on November 15. 

(ii) Conclusion. In this Example 11, the 

orientation period is not considered a 

subterfuge for the passage of time and is not 

considered to be designed to avoid 

compliance with the 90-day waiting period 

limitation. Accordingly, plan coverage for H 

must begin no later than February 14, which 

is the 91st day after H completes the 

orientation period. (If the orientation period 

was longer than one month, it would be 

considered to be a subterfuge for the passage 

of time and designed to avoid compliance 

with the 90-day waiting period limitation. 

Accordingly it would violate the rules of this 

section.) 

* * * * * 

Department of Labor 

Employee Benefits Security 

Administration 

29 CFR Chapter XXV 

For the reasons stated in the 

preamble, the Department of Labor 

amends 29 CFR part 2590 as follows: 

PART 2590—RULES AND 

REGULATIONS FOR GROUP HEALTH 

PLANS 

■ 3. The authority citation for part 2590 

continues to read as follows: 

Authority: 29 U.S.C. 1027, 1059, 1135, 

1161–1168, 1169, 1181–1183, 1181 note, 

1185, 1185a, 1185b, 1185c, 1185d, 1191, 

1191a, 1191b, and 1191c; sec. 101(g), Pub. L. 

104–191, 110 Stat. 1936; sec. 401(b), Pub. L. 

105–200, 112 Stat. 645 (42 U.S.C. 651 note); 

sec. 512(d), Pub. L. 110–343, 122 Stat. 3881; 

sec. 1001, 1201, and 1562(e), Pub. L. 111– 

148, 124 Stat. 119, as amended by Pub. L. 

111–152, 124 Stat. 1029; Secretary of Labor’s 

Order 3–2010, 75 FR 55354 (September 10, 

2010). 

■ 4. Section 2590.715–2708 is amended 

by adding paragraph (c)(3)(iii) and a 


ehiers on DSK2VPTVN1PROD with RULES
35948 Federal Register / Vol. 79, No. 122 / Wednesday, June 25, 2014 / Rules and Regulations 

new Example 11 in paragraph (f) to read 

as follows: 

§ 2590.715–2708 Prohibition on waiting 

periods that exceed 90 days. 

* * * * * 

(c) * * * 

(3) * * * 

(iii) Limitation on orientation periods. 

To ensure that an orientation period is 

not used as a subterfuge for the passage 

of time, or designed to avoid 

compliance with the 90-day waiting 

period limitation, an orientation period 

is permitted only if it does not exceed 

one month. For this purpose, one month 

is determined by adding one calendar 

month and subtracting one calendar 

day, measured from an employee’s start 

date in a position that is otherwise 

eligible for coverage. For example, if an 

employee’s start date in an otherwise 

eligible position is May 3, the last 

permitted day of the orientation period 

is June 2. Similarly, if an employee’s 

start date in an otherwise eligible 

position is October 1, the last permitted 

day of the orientation period is October 

31. If there is not a corresponding date 

in the next calendar month upon adding 

a calendar month, the last permitted day 

of the orientation period is the last day 

of the next calendar month. For 

example, if the employee’s start date is 

January 30, the last permitted day of the 

orientation period is February 28 (or 

February 29 in a leap year). Similarly, 

if the employee’s start date is August 31, 

the last permitted day of the orientation 

period is September 30. 

* * * * * 

(f) * * * 

Example 11. (i) Facts. Employee H begins 

working full time for Employer Z on October 

16. Z sponsors a group health plan, under 

which full time employees are eligible for 

coverage after they have successfully 

completed a bona fide one-month orientation 

period. H completes the orientation period 

on November 15. 

(ii) Conclusion. In this Example 11, the 

orientation period is not considered a 

subterfuge for the passage of time and is not 

considered to be designed to avoid 

compliance with the 90-day waiting period 

limitation. Accordingly, plan coverage for H 

must begin no later than February 14, which 

is the 91st day after H completes the 

orientation period. (If the orientation period 

was longer than one month, it would be 

considered to be a subterfuge for the passage 

of time and designed to avoid compliance 

with the 90-day waiting period limitation. 

Accordingly it would violate the rules of this 

section.) 

* * * * * 

Department of Health and Human 

Services 

45 CFR Subtitle A 

For the reasons set forth in the 

preamble, the Department of Health and 

Human Services amends 45 CFR part 

147 as set forth below: 

PART 147—HEALTH INSURANCE 

REFORM REQUIREMENTS FOR THE 

GROUP AND INDIVIDUAL HEALTH 

INSURANCE MARKETS 

■ 5. The authority citation for part 147 

continues to read as follows: 

Authority: Secs. 2701 through 2763, 2791, 

and 2792 of the Public Health Service Act (42 

U.S.C. 300gg through 300gg–63, 300gg–91, 

and 300gg–92). 

■ 6. Section 147.116 is amended by 

adding paragraph (c)(3)(iii) and a new 

Example 11 in paragraph (f) to read as 

follows: 

§ 147.116 Prohibition on waiting periods 

that exceed 90 days. 

* * * * * 

(c) * * * 

(3) * * * 

(iii) Limitation on orientation periods. 

To ensure that an orientation period is 

not used as a subterfuge for the passage 

of time, or designed to avoid 

compliance with the 90-day waiting 

period limitation, an orientation period 

is permitted only if it does not exceed 

one month. For this purpose, one month 

is determined by adding one calendar 

month and subtracting one calendar 

day, measured from an employee’s start 

date in a position that is otherwise 

eligible for coverage. For example, if an 

employee’s start date in an otherwise 

eligible position is May 3, the last 

permitted day of the orientation period 

is June 2. Similarly, if an employee’s 

start date in an otherwise eligible 

position is October 1, the last permitted 

day of the orientation period is October 

31. If there is not a corresponding date 

in the next calendar month upon adding 

a calendar month, the last permitted day 

of the orientation period is the last day 

of the next calendar month. For 

example, if the employee’s start date is 

January 30, the last permitted day of the 

orientation period is February 28 (or 

February 29 in a leap year). Similarly, 

if the employee’s start date is August 31, 

the last permitted day of the orientation 

period is September 30. 

* * * * * 

(f) * * * 

Example 11. (i) Facts. Employee H begins 

working full time for Employer Z on October 

16. Z sponsors a group health plan, under 

which full time employees are eligible for 

coverage after they have successfully 

completed a bona fide one-month orientation 

period. H completes the orientation period 

on November 15. 

(ii) Conclusion. In this Example 11, the 

orientation period is not considered a 

subterfuge for the passage of time and is not 

considered to be designed to avoid 

compliance with the 90-day waiting period 

limitation. Accordingly, plan coverage for H 

must begin no later than February 14, which 

is the 91st day after H completes the 

orientation period. (If the orientation period 

was longer than one month, it would be 

considered to be a subterfuge for the passage 

of time and designed to avoid compliance 

with the 90-day waiting period limitation. 

Accordingly it would violate the rules of this 

section.) 

* * * * * 

[FR Doc. 2014–14795 Filed 6–20–14; 4:15 pm] 

BILLING CODE 4830–01–P; 4510–29–P; 4120–01–P; 

6325–64–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 100 

[Docket Number USCG–2014–0073] 

RIN 1625–AA08 

Special Local Regulation; Annual 

Swim Around Key West, Atlantic 

Ocean and Gulf of Mexico; Key West, 

FL 

AGENCY: Coast Guard, DHS. 

ACTION: Temporary final rule. 

SUMMARY: The Coast Guard is 

establishing a special local regulation on 

the waters of the Atlantic Ocean and the 

Gulf of Mexico surrounding the island 

of Key West, Florida during the Annual 

Swim around Key West on June 28, 

2014. The event entails a large number 

of participants who will begin at 

Smather’s Beach and swim one full 

circle clockwise around the island of 

Key West, Florida. The special local 

regulation is necessary to provide for 

the safety of the spectators, participants, 

participating support vessels and 

kayaks, and other vessels and users of 

the waterway during the event. The 

special local regulation will consist of a 

moving area that will temporarily 

restrict vessel traffic in a portion of both 

the Atlantic Ocean and the Gulf of 

Mexico, and will prevent nonparticipant vessels from entering, 

transiting through, anchoring in, or 

remaining within the area unless 

authorized by the Captain of the Port 

Key West or a designated representative. 

DATES: This rule is effective and will be 

enforced from 7:30 a.m. until 3:30 p.m. 

on June 28, 2014. 


ehiers on DSK2VPTVN1PROD with RULES