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August 2016 Benefits News

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EEOC Issues Final Rules on Wellness Incentives Under ADA and GINA

Kathleen Salas Bass

On May 17, 2016, the EEOC issued both a Final Rule under Title I of the Americans with Disabilities Act (ADA) (ADA Final Rule) and a Final Rule under Title II of the Genetic Information Nondiscrimination Act (GINA) (GINA Final Rule) with regard to wellness programs. The two rules focus on rewards and incentives provided to employees in order to encourage participation in wellness programs, where the program involves a disability-related inquiry (such as health risk assessments) or medical examinations (including biometric screenings.) The EEOC’s position is that much of the guidance is clarification of existing law, and is therefore effective immediately. The expanded notice requirements and the rules regarding the use of financial inducements are effective for plan years beginning on or after January 1, 2017.

The ADA Final Rule largely retains the provisions of the Proposed Regulations published on April 20, 2015 and the GINA Final Rule largely retains the provisions of the Proposed Regulations published on October 30, 2015. One of the significant changes under the ADA Final Rule is a new notice requirement. The new notice is part of the requirement that the wellness program be “voluntary.” The definition of “voluntary” under the ADA Final Rule includes the following factors:

  • Participation/Incentives. The employee may not be required to participate in the wellness program, and the financial incentives may not be so substantial as to be “coercive.”

    • The EEOC determined that the incentive offered would not be coercive if it is not more than 30% of the total cost (employee plus employer contribution) of self-only coverage. This is similar to the HIPAA requirement for health-contingent programs, but under the ADA Final Rule, it applies to both health-contingent and participation-only programs.

    • The incentive limit is calculated based on the cost of self-only coverage, unlike the HIPAA nondiscrimination rules, which calculate the incentive limit, based upon the total coverage the employee has, including family coverage if spouses and dependents are able to participate in a wellness program. The ADA Final Rule explains that the ADA non-discrimination rules apply to employees and applicants, not to spouses and dependents. Accordingly, incentives related to spousal and dependent participation in the wellness program would not be subject to the ADA Final Rule, but the GINA Final Rule applies the same limit to incentives for spouses who provide information about current or past health status.

    • The calculation of the incentive is as follows:

      • Where participation in the wellness program depends upon enrollment in a particular group health plan, then the incentive would be based upon the cost of the self-only coverage under that plan.

      • Where an employer only offers one group health plan, then the incentive would be based upon the cost of the self-only coverage under that plan.

      • Where an employer offers two or more group health plan options, the incentive would be based upon the cost of the lowest-cost self-only coverage offered.

      • Where an employer does not offer a group health plan, then the incentive would be based upon the cost of the second-lowest cost Silver Plan available through the state or federal health care exchange in the location the employer identifies as its principal place of business.

    • A smoking cessation program is not limited to the 30% incentive if the employee is only asked about tobacco use, and the 50% incentive limit under HIPAA could apply. A smoking cessation program that includes a medical screening for tobacco use, however, is limited to the 30% incentive as that would be a medical examination under the ADA Final Rule.

    • The GINA Final Rule clarifies that tobacco use is not genetic information.

  • No Retaliation for Non-Participation. The employer may not take any adverse action, retaliate against, or coerce employees who choose not to participate in the wellness program.

  • No Denial of Group Health Plan Coverage. The employer may not deny coverage under any group health plan to an employee who elects not to participate in the wellness program.

  • Notice Requirements. Employees participating in a wellness program that collects employee medical information (through disability-related questions and/or medical examinations) must be provided a notice.

    • The notice must be written in language reasonably likely to be understood by the employee from whom medical information is being obtained

    • The content of the notice must include the following information:

      • The medical information that will be collected;

      • How the medical information will be used;

      • With whom the medical information will be shared; and

      • How the medical information will be kept confidential.

    • The notice may be combined with any notice being provided under HIPAA as long as the content requirements are met.

    • The EEOC subsequently provided a sample notice for employers to use to meet this notice requirement. Use of the sample notice is not required.

    • There is no specific timing requirement for distributing the notice, but it must be given to the employee prior to the employee providing any health information, and in sufficient time for the employee to decide whether to participate in the wellness program.

    • The notice may be provided in any format that will be effective in reaching employees being offered participation in the wellness program, including hard copy, or by email with the subject line clearly identifying what the notice is about. The EEOC cautions employers not to provide the notice along with a lot of other information not relating to the wellness program as this could result in an ineffective notification.

Employers that offer wellness programs should be aware of these new rules and prepare for compliance with the new requirements.


Do You Need to Amend Your Retirement Plan by 12/31/2016?

Sherrie Boutwell

Although this sounds like a simple question, as with most questions involving qualified plans, the answer is not that simple. Some qualified retirement plans will need to be amended by 12/31/2016, while some will need to be amended by 1/31/2017 and others will need to be amended at other times. In addition, if you missed a required amendment, the time to amend and file for voluntary correction is now.

12/31/2016 Amendment Deadline

Voluntary Changes. Most qualified retirement plans that have plan years ending on 12/31/2016 (and this includes most plans) and that have made voluntary design changes during the 2016 plan year will need to be amended by 12/31/2016, unless they have already been amended to reflect those changes. This is because all qualified plans are required to be operated in accordance with their terms and failure to do so can be a plan disqualification event. Plan disqualification can have extremely adverse tax consequences to the plan sponsor and the plan’s participants (see Because of this requirement, voluntary changes in plan design must be reflected in the plan document in a timely manner, which is generally no later than the last day of the plan year in which the change is made. See Rev. Proc. 2007-44 and Rev. Proc. 2016-37.

It is important to note that some design changes may need to be reflected in a plan amendment sooner than the last day of the plan year: where, for example, a later amendment date such as the last day of the plan year would result in a cutback of a protected accrued benefit. Governmental plans generally have longer deadlines, because of their unique circumstances.

Cash Balance Defined Benefit Plans. In addition to voluntary design changes, some cash balance defined benefit plans also need to be amended by 12/31/2016 to bring the plan document into compliance with the final cash balance plan regulations that were issued on 11/15/2015 and which become effective on 1/1/2017.

1/31/2017 Deadline

In Rev. Proc. 2007-44, the IRS established a five year remedial amendment cycle for individually designed plans, based on each employer’s situation and taxpayer identification number - that five year cycle will end starting 1/1/2017. However, employers who are on Cycle “A” (or who are in a controlled or affiliated service group that made an election to use Cycle “A” for the group), and who wish to obtain one more favorable IRS determination letter for their qualified plan, may still amend those plans and submit them for approval on or before 1/31/2017.

After 1/1/2017, the circumstances under which an employer that sponsors an individually designed plan may request an IRS determination letter will be quite limited (when the plan is first established, when it is terminated and when the IRS says it will allow the submission). See Rev. Proc. 2016-37.

Other Deadlines – New 2 Year Amendment Cycle Starting 1/1/2017

As mentioned above, plan amendments may need to be adopted prior to the last day of a plan year. In addition, starting in 2016, the IRS will publish a list of required amendments each year and employers who sponsor individually designed plans will generally have two years to adopt those required amendments. Of course, the plan will have to be operationally compliant in the meantime, even if the amendment is not yet required to be adopted. See Rev. Proc. 2016-37. Additionally, some amendments to correct plan discrimination issues in a prior year may be required within 9½ months of the prior plan year.

6 Year Cycles/Deadlines for Pre-Approved Plan Documents

Pre-approved plans such as prototype and volume submitter plans are still on the same six-year cycles that the IRS established in Rev. Proc. 2007-44. Plan sponsors using those documents will still have to meet the deadlines applicable to such plans. For example, all pre-approved defined contribution plans were required to adopt their applicable new documents by April 30, 2016. The IRS will publish new applicable amendment dates for pre-approved plans at the same time they issue the new approval letters.

A Special Note - 403(b) Plans in 2017

In the past, there were no “pre-approved” 403(b) plans. However, the IRS will be approving prototype and volume submitter 403(b) plans soon, possibly as soon as next spring, and then 403(b) plan sponsors will have two years to adopt a pre-approved document. There is no other approval process for 403(b) plans, so it is widely expected that most 403(b) plans will move to pre-approved plan documents, once the IRS issues those approval letters. Until the IRS issues approval letters for 403(b) prototype plans, 403(b) plans will continue to enjoy an extended remedial amendment period (but a written plan document is still required).


It is critical to the plan’s tax qualified status that plan amendments be adopted in a timely manner. Unfortunately, plan amendment deadlines are not “a one-size fits all” situation, so plan sponsors must take care to make sure they are meeting the deadline that applies to their particular plan and circumstances.


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