Employee Assistance Plans (EAPs) are popular employer-sponsored plans that help employees address personal and work related problems that impact their health or job performance. Benefits provided by EAPs are varied in both scope and breadth. Benefits may include:
- Mental health referral services
- Mental health counseling
- Financial counseling
- Drug or alcohol abuse counseling
- Assistance with addressing major life events.
The wide variety of EAPs allow employers to find a plan that is both affordable and of value to employees. But, this variety also makes it difficult to determine the compliance requirements that surround an EAP. And, sometimes EAP services may even be included in life or disability packages.
To determine if an EAP is subject to ERISA, it depends on whether the plan provides medical care. If a plan provides medical care it is subject to ERISA. The federal Department of Labor (DOL) has issued advisory opinions that an EAP with trained counselors who provide counseling services is providing medical care. Of note, the trained counselors do not have to be doctors or psychologists to meet this threshold.
A plan that only provides referrals to counselors may not be deemed to “provide medical care” and may, therefore, not be an ERISA plan. However, if the service providers that make the referrals are trained in a field related to the EAP’s services, this could mean that the plan would be deemed to provide medical benefits.
ERISA also applies only when a plan is “established or maintained” by an employer. If the employer doesn’t contribute to the cost of the EAP or otherwise endorse the EAP, it may not be considered as “established or maintained” by the employer.
If a determination is made that the plan is subject to ERISA, then the plan is subject to ERISA’s plan document, Summary Plan Description (SPD) requirements and other ERISA provisions. Of note, information provided by the EAP vendor may not be sufficient to meet ERISA requirements.
If the plan provides counseling it would be considered a group health plan that is subject to COBRA. EAPs are generally offered to all employees, even those who may not participate in the employer-provided health plan. As such, an EAP subject to COBRA requires that the COBRA initial notice be provided to all EAP-eligible employees.
To determine the applicable COBRA premium, employers should determine the premium attributable to the health care related benefits only. For example, the premium attributable to job counseling or financial counseling services would not be included in the COBRA premium.
Open enrollment presents yet another challenge. If an employee continues EAP coverage under this scenario, but the employee was eligible for the group health plan, but not enrolled, then an opportunity to elect the health plan would be required.
Employers may limit eligibility for the EAP to those employees who enroll in the group health plan to avoid this COBRA complication. But, limiting coverage to those participating in the group health plan poses ACA problems as the next paragraphs illustrate. Alternatively, the EAP’s benefits may continue after what would be a qualifying event for 36 months. As a result, there would be no loss of EAP coverage and no COBRA trigger.
Affordable Care Act (ACA)
EAPs posed particular problems after enactment of the ACA. The DOL and Treasury departments issued rules that EAPs would be considered “excepted benefits” and, therefore, exempt from the ACA.
An EAP is considered an “excepted benefit” if four requirements are met:
- They must not provide significant benefits in the form of medical care. The amount, scope, and duration of covered services will be considered in evaluating compliance with this requirement.
- EAP benefits may not be coordinated with group health plan benefits
- EAP participants may not be required to use or exhaust EAP benefits before they are eligible for group health plan benefits
- Eligibility for EAP benefits may not be made dependent on participation in another group health plan
- No employee premiums or contributions can be required for participating in an EAP
- An EAP that is an excepted benefit may not impose cost-sharing requirements.
The final rule that includes these requirements is here.
Health Savings Accounts (HSAs)
Since EAP plans often include coverage for services irrespective of the employer’s high deductible health plan (HDHP), this raises the concern that an EAP could cause a person to lose eligibility to contribute to an HSA. The IRS has provided guidance that an EAP is not a health plan if it does not provide “significant benefits in the nature of medical care or treatment.”
IRS Notice 2004-33 Q&A number 10 addresses this concern.
As with many compliance issues in employee benefits, the facts and circumstances are critical to assessing compliance. And, the “right” answer may not be clear or apparent.