Understanding Employee Benefits Eligibility

One of the best ways to attract and retain top employees is to offer them great benefits packages. As important as that is, it's not enough to ensure that employees are satisfied with their benefits. As a manager or HR professional, you're also responsible for ensuring that employees are properly enrolled in their benefits plans. If you don't, they might run into unexpected problems in attaining coverage. One particular area of concern is employee benefits eligibility.

This article provides an overview of how employee eligibility for benefits works. It covers:

• What you need to know about employee benefits enrollment
• When employees can enroll
• When their coverage becomes effective
• Who they can enroll as dependents
• Whether coverage can be applied retroactively

Effective dates and enrollment

To receive benefits, employees have to enroll. Usually, they can only enroll in employer-provided group health insurance plans during the company’s enrollment periods. There is also usually a lag between the time they enroll and the time that their coverage begins. Much of this is up to the discretion of the employer or carrie.

You are not required to provide benefits to all employees. Health insurance is only legally mandated for employees working at least 30 hours per week or 130 hours worked per month, and then only if the employer is covered by the Affordable Care Act (ACA). One exception, though, is workers' compensation insurance, which is required for most employers.

When can employees enroll for benefits?

Enrollment periods occur when employees first join the company. This initial enrollment period is followed by annual open enrollment periods. Otherwise, employees usually can’t enroll in a health care benefits plan unless they have a qualifying life event (QLE).

There is no required duration for open enrollment periods. It’s up to the employer, but the periods are typically at least two to four weeks. They are generally scheduled to be completed a few weeks before each new plan year begins. For plans that start on January 1, the open enrollment period will often be during the preceding November.

What are qualifying life events?

Benefits eligibility is often based on QLEs. These are changes in a person’s life that give them the right to change their health insurance plan or enroll in a new plan outside of the usual enrollment periods. These events may occur at any time during the year.

Life events that may be QLEs include:

• Getting married or divorced.
• Having a baby or adopting a child.
• Losing coverage from a parent’s health insurance because you turn 26.
• Losing health insurance coverage because you lose a job.
• Moving out of your health plan area.
• The death of a family member whose plan covered you.

When does enrollment take effect?

Enrollment is generally not instantaneous. Health coverage usually begins at a specified time, often the first day of a future month. For new hires, coverage typically begins on the first day of the month that follows enrollment. For employees enrolling or making changes during the open enrollment period, coverage may begin on the first day of the next plan year. That’s typically on January 1, but is sometimes on February 1 or March 1.

The day that coverage starts is called the “effective date.” If an employer is subject to the ACA, then health insurance coverage must start within 90 days. The ACA also has a stability period, which is the time when employees are guaranteed coverage. ACA coverage, however, is only required for full-time employees of large employers.

Eligible dependents

Three requirements determine eligibility for a dependent to be covered by an employee’s insurance plan:

• The employee must claim the person as a dependent for tax purposes.
• The dependent must reside in the United States.
• The dependent must have a valid Social Security number or equivalent.

Examples of benefits-eligible dependents include:

• Spouses.
• Children under the age of 26. Note that some states allow children 26 and older to extend their coverage through their parents’ plan.
• Siblings.
• Domestic partners. This may be subject to carrier requirements, as some carriers do not consider domestic partners to be eligible dependents. State and local laws may also affect domestic partner benefits.
• Disabled parents. Depending on carrier rules, the parent must share the same address as the employee, be disabled and ineligible for Medicare.

Please note that ultimately it is the carrier’s discretion as to who is considered an eligible dependent. Dependents are subject to the same enrollment periods as employees. They cannot enroll in insurance outside of an initial or open enrollment period or qualifying life event. When a dependent enrolls during the initial or open enrollment periods, they have the same effective date as the employee.

What is retroactive coverage?

Retroactive insurance coverage means that coverage extends back in time for a specified period.Although this is a common feature in small-business liability insurance, it only applies to employer-provided health insurance in three circumstances:

1. When employees pay for their health insurance premiums using pre-tax dollars via a cafeteria plan, retroactive enrollments are allowed if employees sign up within 30 days from the date they were hired. In that case, the coverage can extend back to the hire date. This is an exception to the general rule that employees must enroll in benefits before their coverage begins. The reason for this exception is to provide coverage to employees whose onboarding didn’t occur on their first day. However, this retroactive coverage is not required – it’s completely up to the employer whether to offer it.
2. When an employee has a baby, their coverage is extended retroactively to the day the child was born or adopted.
3. Employers may optionally choose to provide retroactive coverage for other QLEs, extending back to the date of the event. However, coverage often does not start until the first of the month following the qualifying event.

Understanding employee benefits eligibility

To attract and retain a talented workforce, you must offer a competitive benefits program. Small and medium-sized companies often can't offer the kind of health benefits that big companies have access to. That will change if you partner with TriNet. At TriNet, we can help you access plans from top insurance companies that offer great options and perks.

We also offer more. We can help you with your compliance issues. HR laws and federal government regulations are complex and constantly changing. We keep up with the changes to laws and regulations so that you don’t have to. If you work with us, not only will you be able to offer your employees top-of-the-line plans. You’ll also have the peace of mind that comes from knowing that your HR functions are being administered correctly.