September 11, 2017

Wellness Rules Under Scrutiny (article)

Two recent developments in the wellness program arena bear monitoring. 


Challenging EEOC’s Voluntary Standards.  In response to the wellness program final regulations issued by the Equal Employment Opportunity Commission on May 17, 2016, the American Association of Retired Persons (AARP) brought a lawsuit against the EEOC, challenging the voluntary standards of the 30 percent requirement. 


As background, the EEOC’s regulations relating to the Americans with Disabilities Act (ADA) wellness standards prohibit the collection of medical information except to the extent that the request is voluntary (see Wellness and the ADA – More Guidance Issued, Benefit Beat, 7/7/16 and our Special Edition of At Issue, dated May 25, 2016, for a summary of the EEOC rules).  Accordingly, 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, is permissible.  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 percent.  The AARP challenged the 30 percent standard alleging that the 30 percent threshold is too high to constitute a voluntary standard. 


In its review, the Court determined that the EEOC did not provide adequate substantiation for the 30 percent standard; therefore, the matter is returned to the EEOC for further consideration and validation of the 30 percent standard.  The Court did say, though, that the May 2016 regulations will remain in effect until further analysis is provided by the EEOC.  The Court’s position is that plans have been implemented based on these regulations and to suspend them at this time would be too disruptive. 


Employers sponsoring wellness programs should stay tuned for future developments.  It is unclear when the EEOC will have an opportunity to review these regulations since many of the EEOC’s administrative and enforcement team positions remain unfilled.


Failure to provide reasonable alternatives to achieve wellness goals.  The Department of Labor (DOL) is challenging Macy’s benefit package, specifically relating to its smoking cessation component of its wellness program in a civil action complaint filed on August 16, 2017 in  the U. S. District Court for the Southern District of Ohio (Acosta v. Macy’s Inc. , S.D. Ohio, No. 1:17-cv-00541).  The challenge alleges that Macy’s failed to provide a reasonable alternative to participants which would have enabled them to avoid a tobacco surcharge, ranging from $35 to $45, for those who failed to meet the standards of Macy’s tobacco cessation program.


As background, a contingent wellness program, whether activity or outcome-based, must provide a reasonable alternative to individuals under certain circumstances.  Generally, a smoking cessation program can qualify as a reasonable alternative.  The DOL alleges that Macy’s continued to charge the smokers the higher rate without giving them an opportunity to achieve the reward. 


Employers should review their wellness program to ensure that reasonable alternatives are provided and full rewards are granted to individuals who accomplish the reasonable alternative.

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.   

Accelerated Recovery Resources

Access articles and tools to help your business generate cash, improve leverage, and align & transform as you recover from the pandemic.

COVID-19 Resources

Access all COVID-19 related articles to help your business respond to the pandemic.

Insights in Your Inbox