September 12, 2016

Wellness Incentive Calculation Clarified (article)

The Equal Employment Opportunity Commission (EEOC) has issued an informal, nonbinding Letter clarifying the amount of incentives that can be charged for participation in a wellness program without running afoul of the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act.


As background, the final EEOC rules relating to wellness programs (see Wellness and the ADA – More Guidance Issued, Benefit Beat, 7/6/16) sanction the use of incentives (financial or in-kind such as time-off awards, prizes, or other items of value) in a wellness program, whether in the form of a reward or penalty.  However, if the wellness program is a participatory program or a health-contingent program, or some combination of the two, the maximum allowable incentive available under the program is 30% of the cost of single coverage.


This EEOC letter specifically addresses a situation in which an employer offers multiple health plans or health plan options, together with a wellness program.  In the instance of multiple plans or multiple plan options, the amount of the wellness incentive is tied to the lowest cost plan option.  In other words, the maximum 30% reward (incentive or disincentive) cannot be more than 30% of the cost of single coverage in the lowest cost plan.


The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.   

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