Court puts EEOC wellness incentive on life support

A federal court has vacated a portion of the EEOC’s wellness program regulations, effective Jan. 1, 2019. The court allowed the delay to both grant the EEOC more time to amend the regulations and give employers more time to adjust their policies.

The controversial portion of the regulations allows employers to impose up to a 30% surcharge on health insurance premiums to employees who decline to participate in wellness programs.

The EEOC has asserted that employers that stayed under the 30% threshold were not coercing employees to participate in wellness programs.

Wellness programs must, by law, be voluntary.

However, the court found the EEOC’s 30% figure to be arbitrary and capricious, since federal regulators had provided no evidence to justify the figure.

The EEOC told the court that it will have a new interim rule ready by August 2018 and a final rule by October 2019, with an effective date of 2021. The court rejected that timetable and ruled the EEOC must give a status update in March 2018 on its efforts, with a deadline for releasing a new proposed rule in August 2018.

Note: Employers may use the 30% surcharge this year, but not in the future. The proposed rule in August may provide some guidance, but employers who keep the surcharge in 2019 do so at their own risk.