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An effective date is the specific date when a law, contract, policy, or treaty becomes applicable or ceases to be enforced. It is used in various fields such as business, employment, insurance, and public policy.
Also known as an enactment date, an effective date is the specific month, day, and year when a law, contract, policy, or treaty becomes applicable. Effective dates are also sometimes used to identify the exact date on which a contract or policy will cease to be enforced and is usually provided in preparation for some new document to replace the previous document. Governments, businesses, and even educational institutions make use of the effective date as part of their ongoing role.
In the business world, the effective date is an integral part of any type of contractual agreement. Identifying a specific start date makes it possible for both parties to know exactly when the provisions of the contract will apply. For example, if a supplier extends a reduced rate for services rendered after a specific date, the customer will know that any services received before that contract effective date will not be subject to the contracted rate.
Contracts often carry another type of effective date, known as an end date or completion date. This is simply the date the contract provisions are scheduled to expire. Unless the contract is renewed, the customer will not receive discounted pricing or any other benefit identified in the contract after the end date indicated in the body of the contract.
In the same way, a company or educational system can also use the effective date concept. One application has to do with employment and termination policies. New employees are assigned a specific hire date that indicates when they officially enter the payroll and assume their responsibilities. Most systems also use a termination effective date to identify the specific date an employee is no longer associated with the company. The termination date serves as the cut-off point at which salary extension and other benefits cease.
Municipalities also make use of enactment dates. One of the most common applications has to do with the announcement of changes in public policy. For example, if the garbage collection schedule is restructured to accommodate a growing population, the city may publish the new schedule in local media, noting the date when the revised sanitation schedule becomes effective.
With insurance coverage, the policy effective date usually has to do with the start of benefits under the current terms and provisions of the policy. When changes to existing coverage occur, insurance providers tend to publish the changes in advance and advise their customers on when the change will take effect. In the United States, retirees and others who qualify for government-operated insurance programs receive formal notice of the Medicare effective date for their new coverage, along with details about the scope of that coverage.
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