Question

Ned just attended an orientation session for new employees. The employee benefits director spoke for an hour about the various employee benefits the company offered and the provisions of these benefits. During the presentation, the employee benefits director discussed (1) probationary periods, (2) eligibility periods (open enrollment), and (3) elimination (waiting) periods. Ned is confused about these terms and has asked you to explain the meaning and importance of each “period.” How would you describe these “periods” to Ned?

Answer 1

(1) probationary periods -

Probation period means the “trial period” that you serve as a new employee in an organization.

Probationary periods are defined periods of time that employees are exempt from certain contractual items, most importantly the notice period required for termination. The probationary period allows both employee and employer to see if they are a ‘good fit’ and to make things easier if they need to terminate the contract.

The duration of a probation period varies across businesses and industries. Usually, they can last anywhere between 3 months to a year.

In the probation period, the employer or manager will evaluate whether a recruit is capable of the work and responsibilities that he/she is given. They might also judge how well the person fits in with other employees, responds to authority, and behaves in the workplace.

On the other hand, the new employee can also use his/her probation period to find out if he/she is comfortable handling the job responsibilities. This is also a good time for the employee to figure out other logistics such as commute time, working hours, physical space of the office, and decide if it is the right job for him/her.

At the end of the probation period, if things are unsatisfactory, the company may terminate the employee’s contract, or the employee may decide to leave the company for better alternatives.

(2) eligibility periods (open enrollment)-

Open enrollment is usually a few weeks to a few months during the year that allows employees to make changes to their various benefit plans. These changes usually cover benefits such as health insurance, vision, dental, and life insurance. You may also have benefits such as disability and health savings accounts that would be eligible for changes during the open enrollment period as well.

During open enrollment, employees have the option to enroll in benefits for the first time, change their current plans or coverage amounts, or to drop coverage completely. These decisions have a significant financial impact so it’s important to weigh your options carefully.

With most types of benefits once you elect an option you are bound to that option for an entire year unless you meet a few exceptions. For example, if you sign up for the health plan that has a bi-weekly premium of $150 you’re going to be stuck with that plan until your next open enrollment period or a major qualifying event.

The IRS defines these qualified events as: Marriage,Divorce,Birth,Adoption or Death.

If you don’t have a qualifying event listed above you can’t make changes to your current coverage options until the next open enrollment period. Obviously, choosing the wrong plan can be costly if you’re forced to stick with your decision for an entire year and you don’t qualify for a change.

(3) elimination (waiting) periods.-

An elimination period is the length of time between when an injury or illness begins and receiving benefit payments from an insurer. Also known as the "waiting" or "qualifying" period, policyholders must, in the interim, pay for these services.

A waiting period is the amount of time an insured must wait before some or all of their coverage comes into effect. The insured may not receive benefits for claims filed during the waiting period. Waiting periods may also be known as elimination periods and qualifying periods.

The waiting period or elimination period before the insured may make claims varies by insurer, policy, and type of insurance. For more extended waiting periods before coverage is active, the cost of a premium may reduce slightly. In health insurance, there are several types of waiting periods.

An employer waiting period requires an employee to wait a specified period, such as three months, before they may receive company-subsidized health services. Often a provision like this will be in place for a company that expects a high turn-over rate in employees. Once an employee enrolls, they may have an additional waiting period before they may claim on the coverage.