Under the Employee Retirement Income Security Act of 1974 (ERISA), employee welfare benefit plans are subject to certain fiduciary rules, claims procedures and plan document requirements (including providing participants with a Summary Plan Description (SPD) and possibly also filing a Form 5500 annual return).
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.
When most people think about these two acts, they think about their group medical, dental and vision plans. However, you may be overlooking other elements of your employee benefits package that are also subject to these requirements. Commonly overlooked elements include the Employee Assistance Plan (EAP) and the Wellness Program.
ERISA defines an employee welfare benefit plan as a plan or program “established or maintained by an employer or by an employee organization (such as a union), or both, that provides medical care for participants or their dependents directly or through insurance, reimbursement, or otherwise.”
Under COBRA, a group health plan is “any arrangement that an employer establishes or maintains to provide employees or their families with medical care, whether it is provided through insurance, by a health maintenance organization, out of the employer’s assets on a pay-as-you-go basis, or otherwise.”
The key question in determining whether your EAP is subject to ERISA and COBRA is whether or not it provides medical care in the form of counseling delivered by trained counselors who work for the plan (either as employees of the company or of an outside service provider). If it does, then the plan will likely need to comply with ERISA and COBRA. If, on the other hand, the EAP is staffed with non-trained individuals who merely provide referrals to professionals in the community, then it is likely exempt from these requirements.
Many common elements of Wellness Programs can cause them to fall into the category of group health plans. These include health risk assessments that provide advice and counseling, as well as employer-paid immunizations and employer-paid biometric screenings. A Wellness Program can also become a group health plan by being linked to another group health plan, such as when employees are rewarded for participation in a Wellness Program with a medical plan premium discount or with lower cost-sharing under the medical plan.
If your EAP or Wellness Program is offered only to individuals who participate in your medical plan, compliance requirements can be satisfied by incorporating these programs into the medical plan. If, however, these ancillary programs are offered to the entire employee population, then separate steps will need to be taken in order to ensure compliance.
ERISA compliance requirements include adopting an official Plan Document, issuing a Summary Plan Description to participants, filing an annual Form 5500 (unless a filing exemption applies), complying with fiduciary standards of conduct, and establishing a claims and appeals process.
COBRA requires the employer to issue an initial notice to participants when participation begins and to offer continuation coverage after a qualifying event occurs. The maximum premium that can be charged for COBRA continuation coverage is 102 percent of the full cost of the coverage (employer and employee portions). Since EAP fees tend to be very low, many employers choose to simply provide the coverage free of charge during the continuation period in order to avoid the administrative burden of processing small premium payments. Nevertheless, an election notice should still be sent, and employers should and resist the temptation to opt departing workers and their dependents into continuation coverage automatically.
Individuals who continue EAP or Wellness Program coverage under COBRA have the same open enrollment and HIPAA special enrollment rights as similarly situated active employees. This means that someone who is continuing coverage only under one of these plans has the right to elect medical and other group health plan coverage at open enrollment or if there is a qualifying event. Since most people will not take the trouble to fill out and return an election form only for EAP and/or Wellness Program coverage, requiring a form rather than using an automatic opt-in strategy minimizes the risk to the employer that a former worker who is only covered under one of these low- or no-cost plans will elect other more costly coverage later if an adverse health event occurs.
DOL audits of employee welfare benefit plans are on the rise. Take the time now to determine if all of your plans are in compliance so you can avoid costly headaches later.