The EEOC Officially Removes Wellness Plan Incentive Rules

In late December 2017, the judge in the AARP vs. EEOC case ordered that the wellness plan incentive rules contained in the Equal Employment Opportunity Commission (EEOC) regulations to be vacated beginning January 1, 2019. The EEOC had an opportunity to draft new rules during the spring and summer of last year, yet we were left waiting through the summer and speculating well into late fall. Then on December 20, 2018, the news came:  the EEOC had finally taken a position and removed the incentive limits entirely.

So now what does this mean?
Employers offering a wellness program requiring medical testing or disability-related questions in exchange for an incentive will need to determine how to handle incentives for such programs without clear guidance from the EEOC about what level of incentive, if any, is considered voluntary and not in violation of ADA or GINA rules. There is no guidance indicating that incentives are prohibited and there is also no guidance indicating that they are allowed and to what extent. Previously, the EEOC rules gave us a line in the sand. For wellness programs regulated by these rules, we knew that any incentive over 30% was clearly prohibited. We have no regulated limit anymore, so without this clear threshold, how do we determine whether our incentive is too high? And what happens if employees claim that the incentive is too large?

While the EEOC is in the process of writing new rules, it seems unlikely there will be much enforcement by the EEOC, if any at all. However, there is a possibility that employees could file private lawsuits. Employers struggling with a decision on how much their incentives should be should take into account their demographics, company culture, how long their incentives have been in place, along with many other factors. Without clarity as to what is considered “voluntary,” the most conservative approach would be to eliminate any incentive tied to medical testing or disability-related questions until further guidance is provided. However, some employers may feel comfortable continuing to comply with an incentive limit of 30% or less for participation (maintaining the status quo until we receive further guidance). Others may feel more comfortable lowering such incentive amounts (e.g. limiting such incentives to 10–15%). Another approach would be to continue to offer incentives for participating in medical testing or answering disability-related questions, but also to offer alternatives for earning the incentive that do not involve medical testing or disability-related questions (e.g. tobacco-related incentives, exercise/diet programs, educational courses) … basically a buffet of options to earn the incentive, so that participants have an opportunity to earn the full incentive without participating in medical testing or disability-related questions.

While we wait for additional guidance from the EEOC, which hopefully will be provided by summer 2019, employers may choose to continue with current structures, or might choose to take a less aggressive approach by lowering such incentives or offering alternatives for earning such incentives. We would advise that such decisions are made after consulting legal advisers in regard to potential risks involved, alongside consideration of the employer’s objectives for the wellness program itself.

Please note that the information contained in this posting is designed to provide authoritative and accurate information, in regard to the subject matter covered. However, it is not provided as legal or tax advice and no representation is made as to the sufficiency for your specific company’s needs. This post should be reviewed by your legal counsel or tax consultant before use.