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2019 Wellness Program Incentives Affected by Final EEOC Rules

On December 20, 2018, the Equal Employment Opportunity Commission (EEOC) vacated the incentive provisions of its final wellness program regulations, effective January 1, 2019. This marks a dramatic reversal from the EEOC’s prior stance and employers again face uncertainty as to their wellness program incentives.

As background, the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) generally require that disability-related inquiries, medical examinations and requests for health information from an employee or a spouse must be “voluntary.” For years, it was unclear whether any incentives, such as health plan premium reductions, could be offered to encourage employee participation in wellness programs subject to ADA and GINA or whether such incentives would make participation “involuntary.”

Man using rowing machineThen, in May 2016, the EEOC published final rules providing that incentives, whether in the form of rewards or penalties, could be offered in amounts up to 30 percent of the cost of self-only coverage to encourage employee participation in a wellness program. The AARP filed suit challenging these rules, and a federal court found in August 2017 that this limit on incentives was arbitrary and didn’t ensure voluntary participation. The court ordered the EEOC to reconsider the regulations but left the incentive limit in place in the meantime to avoid disrupting existing wellness programs. However, the EEOC determined that it would not be able to issue a new rule that would be effective until 2021. The court determined that the EEOC’s proposed timetable was too slow and vacated the 30 percent safe harbor for incentives effective January 1, 2019.

For 2019 and beyond, employers will want to properly structure (or restructure) their wellness programs to ensure compliance with the final EEOC rules. The most conservative approach to this change is to remove all incentives associated with wellness programs that are subject to the ADA or GINA. These include programs with health risk assessments, biometric or lab tests and/or nicotine use tests. However, although there is no longer any guarantee that wellness incentives are permissible up to a specific amount, current law does not expressly prohibit or permit offering incentives to participate in a wellness program.

© 2019 Varnum LLP

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About this Author

John Arendshorst, Varnum Law Firm, Grand Rapids, Employee Benefits Attorney
Partner

John is a member of the firm’s Employee Benefits Team. He counsels employee benefit plan sponsors with respect to compliance with ERISA and IRS requirements for 401(k) plans, ESOPs and other defined contribution plans, defined benefit plans, and deferred compensation arrangements. John also advises clients on employee benefits issues in the context of corporate transactions, including qualified plan compliance issues, change-in-control agreements, continuation of health coverage, and golden parachute payments under Section 280G. John is experienced in negotiating and...

616-336-6560
Lena Gionnete, Varnum Law Firm, Labor and Employment Law Attorney
Associate

Lena is an attorney on the Employee Benefits Practice Team. She works with employers, executives and third-party administrators on a wide range of issues relating to tax-qualified pension plans, 401(k) and profit sharing plans, non-qualified plans, and health and welfare benefit plans. She advises clients regarding compliance with federal laws governing employee benefit plans, including the Internal Revenue Code, ERISA, PPACA, HIPAA and COBRA, and also counsels clients on benefits issues in connection with corporate transactions.

248-567-7435