“Excepted Benefits” Status of EAPs

Last month, the IRS issued proposed regulations  regarding what would be considered “excepted benefits” under ERISA, the Internal Revenue Code, and the Public Health Service Act, and therefore exempt from many health care reform mandates.  One of the highlights of the regulations was the additional guidance on employee assistance programs (“EAPs”).  These regulations propose that in order for an EAP to qualify as an “excepted benefit” beginning in 2015, it must meet the following 4 criteria:

1)      The program cannot provide significant benefits in the nature of medical care.

2)      Its benefits cannot be coordinated with benefits under another group health plan.  The Departments propose 3 conditions to meet this standard:

  • Participants in the separate group health plan must not be required to exhaust benefits under the EAP (making the EAP a “gatekeeper”) before an individual is eligible for benefits under the other group health plan.
  • Moreover, participant eligibility for benefits under the EAP must not be dependent on participation in another group health plan.
  • Lastly, benefits must not be financed by another group health plan.

3)      No employee premiums or contributions may be required to participate in the EAP.

4)      No cost sharing under the EAP.

The agencies invited comments on how to define “significant.”  For example, they requested comments as to whether a program that provides no more than 10 outpatient visits for mental health or substance use disorder counseling, an annual wellness checkup, immunizations, and diabetes counseling, with no inpatient care benefits should be considered to provide significant benefits in the nature of medical care.

Although these regulations are not final, this guidance should be good news for many plan sponsors because it appears that most EAPs will meet the 4 proposed criteria, and therefore be considered an “excepted benefit” not subject to many health care reform mandates.  And, because the criteria listed above would not go into effect until 2015, to the extent that a plan sponsor was concerned that its EAP did not meet the criteria, this guidance could provide an opportunity for the plan sponsor to redesign its EAP to ensure that it does meet the criteria before 2015.

However, it is interesting to note that this guidance does not necessarily shed any light on the separate question of whether an EAP is subject to ERISA because the ERISA “plan” definition includes employer-sponsored plans that provide any “medical benefits.”  Under this broader ERISA definition, most EAPs qualify as ERISA group health plans that must meet  ERISA’s reporting, disclosure, and other requirements, as well as COBRA and other federal mandates.

 Today’s post was contributed by Cynthia Y. Lee

Speak Your Mind