Benefits Monthly Minute
Breathing New Life into Wellness Rulemaking
Many employers offer health promotion and disease prevention activities, known as wellness programs, and the rules governing wellness program incentives have been in a state of flux over the past several years. On January 7, 2021, the EEOC released new wellness program guidance in the form of proposed rules. The proposed rules address what level of incentives employers may lawfully offer to encourage employee participation in wellness programs that require disclosure of medical information, without violating the ADA or GINA. Although HIPAA generally allows employers to offer incentives up to 30% of the total cost of health insurance to encourage participation in certain types of wellness programs, the ADA requires that employee participation in a wellness program that includes medical questions and exams be “voluntary.” Because the ADA and GINA do not define “voluntary,” the rulemaking proposes that, in order to comply with the ADA and GINA, employers may offer no more than a de minimis incentive to encourage participation in wellness programs. In this regard, the proposed rule adopts the view that allowing too high of an incentive would make employees feel coerced to disclose protected medical information to receive a reward or avoid a penalty, and examples of de minimis incentives include water bottles or gift cards of modest value. However, the proposed rules under the ADA do provide an exception for certain wellness programs that would be permitted to offer the maximum allowed incentive under the 2013 HIPAA regulations, such as a HIPAA-compliant health contingent wellness program. The EEOC is accepting comments on the proposed rule for 60 days after the rulemaking is published in the Federal Register, and we expect final rules to be issued thereafter.
KMK Comment: we expect significant comments in the coming months from stakeholders disputing the restrictive “de minimis” standard in the proposed rulemaking. KMK will keep you updated as new rules are released.
The Latest from the DOL on Missing Participants
The latest guidance from the DOL, released on January 12, 2021, to help plan fiduciaries meet their ERISA obligations to locate and distribute retirement benefits to missing or nonresponsive participants comes to us in three forms:
- Best Practices for Pension Plans describes a range of best practices that fiduciaries of retirement plans, such as 401(k)s, should consider as steps their plan could take to help reduce missing participant issues and ensure that plan participants receive promised benefits when they reach retirement age. Examples of best practices include: maintaining accurate census information for the plan’s participant population; implementing effective communication strategies; conducting missing participant searches; and, documenting procedures and actions.
- Compliance Assistance Release 2021-01 outlines the general investigative approach that will guide the DOL’s regional offices on the Terminated Vested Participants Project (TVPP) and facilitate voluntary compliance efforts by plan fiduciaries.
- Field Assistance Bulletin 2021-01 authorizes plan fiduciaries of terminating defined contribution plans use of the PBGC missing participant program. The purpose is to facilitate the transfer of missing participants’ account balances to the PBGC upon the termination or abandonment of an individual account plan essentially to increase the likelihood that missing participants can locate and access their benefits.
KMK Comment: While it is generally useful to have additional regulatory guidance in this area, the prominent disclaimer on the DOL website (“Please note: As of January 20, 2021, information in some news releases may be out of date or not reflect current policies.”) cautions practitioners that these releases are subject to change under the new Biden administration.
The KMK Law Employee Benefits & Executive Compensation Group is available to assist with these and other issues.
KMK Employee Benefits and Executive Compensation email updates are intended to bring attention to benefits and executive compensation issues and developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.