As we reported in an earlier Compliance Buzz, in August 2017, a federal court remanded final wellness regulations back to the Equal Employment Opportunity Commission (“EEOC”) for reconsideration after the court found that the incentive provisions in the rules were “arbitrary and capricious.” Generally speaking, the EEOC regulations permit employers who sponsor wellness programs to provide participants with incentives of up to 30% of the cost of self-only coverage under the health insurance plan. At the time, the court had declined to vacate the regulations out of concern that vacating rules that were already in effect would cause disruption and confusion for employers.
The EEOC subsequently filed a status report indicating that it intended to issue a proposed rule in August 2018 and a final rule in October 2019 that would likely not become effective until at least 2021.
Upon the request of the American Association of Retired Persons, the plaintiff in the case, the court agreed to reconsider its original decision. In its new opinion, the court agreed to vacate the EEOC’s final regulations as they pertain to incentives allowed under wellness plans, citing as one reason for its decision the court’s view that a 2021 applicability date for the new rules would not be sufficiently timely.
In order to provide employers with advance notice of the rule changes, however, the court agreed to delay vacating the rules until January 1, 2019. Prior to that date, however, plan sponsors must continue to comply with the regulations as currently in effect.
In an order accompanying its decision, the court directed the EEOC to issue its notice of proposed rulemaking by August 31, 2018 and to file a revised status report with the court by March 30, 2018. In its decision, the court strongly encouraged the EEOC to take any measures necessary to ensure that the new rules take effect well before 2021.
We will keep you apprised of further developments related to this matter.