This Month’s Compliance Corner: Employee Assistance Program Compliance

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Employer assistance programs (“EAPs”) are not a new concept in the field of employer-sponsored health and welfare benefits; however, the COVID-19 pandemic created a greater push for employers to provide this benefit as employees have begun returning to work while still experiencing adverse health, personal, and financial effects of the pandemic. As detailed more below, EAPs provide employers with way to help their employees address their personal problems that may be impacting their work performance, including their mental health issues. The idea behind EAP programs is that if employees can successfully address stressful issues in their personal life, they will be happier and healthier and more focused at work, which will result in increased productivity, decreased absenteeism, and lower health care costs for the employee and the employer. When considering whether to implement an EAP, or expand services offered under an existing EAP, employers should consider not only if, and how, an EAP (or any additional EAP offerings) can benefit their workforce, but also the applicable legal requirements which may apply to the particular EAP based on its design and offerings.

What is an EAP?

An EAP is an employee benefit program designed to help employees improve their overall physical and mental health by providing services (e.g., counseling, education) and/or referrals to help employees address certain personal problems they may be experiencing. EAPs can be designed differently and may provide services to address varied issues or may focus on one particular type of issue. EAPs often provide counseling and/or referral services for one or more of the following types of issues: fitness and nutrition, stress management, mental health, grief, family-related issues (including childcare, elder care, and marital issues), substance abuse (including alcohol and drug use), and financial and legal concerns.

More recently, employers have utilized EAPs to help their employees cope with mental health issues associated with the COVID-19 pandemic, including but not limited to, the effects of social isolation, teleworking/returning to the office, lack of childcare, financial stress, and grief over illness or death of family members. During the pandemic, many employers expanded services offered under their EAPs to offer remote/online therapy and counseling services, which many employers have retained even after employees have returned to work due to the flexibility and convince remote care provides.

Legal and Compliance Considerations

An EAP’s applicable legal requirements will generally depend on the design and structure of the EAP.  Some benefits provided under an EAP may rise to the level of “medical care” or a “group health plan”, which will subject the EAP to a greater level of federal regulation. Another consideration is whether the employer administers the EAP on its own or whether it contracts with third party service providers or other vendors to do so. The primary legal requirements to consider when designing or considering an EAP are set out below.

Employee Retirement Income Security Act (“ERISA”): If an EAP provides employees or their beneficiaries any “medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services” it will be considered a “welfare benefit plan” under ERISA and will be subject to several compliance requirements thereunder.  See 29 U.S.C. § 1002(1). While the statutory definition of “welfare benefit plan” is quite broad, the Department of Labor has tried to parse out what types of EAPs fall under ERISA’s scope as welfare benefit plans. Generally, when an EAP offers counseling services beyond referrals, the EAP will likely be considered to be a welfare benefit plan under ERISA. For example, the DOL has found the following types of EAPs to be covered under ERISA as a welfare benefit plan providing “benefits in the event of sickness”: (1) an EAP providing confidential, on-site counseling (including mental health counseling) one day a week with referrals to the appropriate agency or clinic; and (2) an EAP (with voluntary and involuntary participation) providing assistance, through an independent third-party EAP administrator, for employee personal problems like drug and alcohol abuse, stress, anxiety, depression, and marital, legal, and financial problems.

In contrast, the DOL has found that an EAP that provides only referrals from either a staff member with no specialized training in counseling, or from a national hotline, was not a welfare benefit plan covered by ERISA because it did not provide any benefits in the nature of “medical benefits” or “in the event of sickness.” The program did not treat any issues (e.g., drug abuse, stress, depression), did not employ any counselors, and did not provide any benefits in addition to the referrals that were free to the employees by virtue of their employment.

If an EAP is subject to ERISA, it will have to comply with ERISA’s reporting and disclosure rules, including the requirement to have a written plan document and summary plan description. These documents must include certain information about the EAP including, among other things, information on eligibility, benefits, and claims procedures under the EAP. ERISA also applies certain fiduciary obligations on the employer plan sponsor and plan administrator, including but not limited to, the duty to act solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them. ERISA also has certain reporting requirements, including the annual Form 5500 (which is filed with the federal government) and summary annual report (which is provided to plan participants).

Affordable Care Act (“ACA”) & Group Health Plan Coverage Rules: Employers should also consider whether their EAPs are “group health plans” under the ACA. Generally, if an EAP provides benefits for medical care, the EAP will be a group health plan unless the EAP is an “excepted benefit” (discussed in more detail below). If the EAP is a group health plan, it must satisfy certain rules under the ACA (e.g., the requirement to provide minimal essential coverage, and the prohibition on annual dollar limits).  Group health plans will also be subject to additional requirements under ERISA, including the DOL’s expanded claims procedure requirements, and continued coverage requirements under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) (discussed below).

Similar to the ERISA determinations mentioned above, the DOL has also addressed when an EAP is a group health plan. EAPs that provide only referrals with no provision of medical services, including counseling services, will not be group health plans; however, EAPs that offer counseling services involving a form of medical care (e.g., counseling for substance abuse or depression), will be considered group health plans, subject to the various group health plan requirements.

Consolidated Omnibus Budget Reconciliation Act (“COBRA”): If an EAP provides medical care and is a group health plan, it will be subject to COBRA’s health plan continuation coverage requirements. In that case, the employer plan sponsor must offer COBRA beneficiaries the opportunity to continue their EAP coverage (at least, any portion of EAP coverage that provides medical care) following a qualifying event, in addition to providing all necessary COBRA notices (e.g., an initial COBRA notice, a COBRA election notice).

Health Insurance Portability and Accountability Act (“HIPAA”): If an EAP provides medical care (which will generally be EAPs that provide direct counseling), the EAP must comply with HIPAA’s Privacy and Security Rules (if the EAP comes into contact with employees’ protected health information (“PHI”)). If the EAP is self-insured by, the employer will generally be responsible for the EAP’s HIPAA compliance, which may, for example, require the creation and implementation of HIPAA policies and procedures that address when PHI may be used and disclosed.

EAPs as Excepted Benefits

As mentioned above, if an EAP is an “excepted benefit,” it can avoid having to comply with many group health plan requirements (which are difficult for EAPs to do based on their limited scope). An EAP will be an excepted benefit (and will be considered supplemental to other coverage offered by the employer) if: (1) it does not provide significant benefits in the nature of medical care (considering the amount, scope and duration of covered services); (2) the benefits are not coordinated with benefits under another group health plan (which means participants in the other group health plan are not required to exhaust EAP benefits first, and eligibility for EAP benefits are not dependent on participation in another plan (i.e., all employees can participate in the EAP)); (3) no employee premiums or contributions are required; and (4) there is no cost-sharing requirements under the EAP. 

The applicable regulations provide examples of excepted benefit EAPs that do not provide significant benefits in the nature of medical care. This includes, for example: (1) an EAP with free or low-cost short-term counseling for mental health issues or emotional disorders and referrals for addressing the problems; and (2) a wellness program that provides fitness services designed to improve overall health and prevent illness and separates out costs charged to the individual for participating from the individual’s coverage under health plan.

Notably, EAPs that are excepted benefits will not amount to coverage that is sufficient, on its own, to satisfy an employer’s coverage responsibilities under the ACA’s employer mandate.  Moreover, excepted benefit EAPs will not be subject to the Mental Health Parity and Addiction Equity Act of 2008 (“MHPAEA”); however, EAPs can still impact an employer and its medical plan’s compliance with the MHPAEA’s parity requirements. The DOL has explained that a medical plan that requires participants to exhaust benefits under an EAP (e.g., mental health counseling services) prior to being eligible for mental health benefits under the medical plan will violate the MHPAEA when the plan does not apply a comparable treatment limit to medical and surgical benefits offered under the medical plan. 

Next Steps

When considering whether to implement an EAP or expand services offered under an EAP, employers should consider the goal of the EAP and the issues primarily affecting their workforce. Employers should consider polling or providing an anonymous survey to employees to determine what support they feel they need from an EAP. Employers may need to promote the EAP and educate their employees on what services are offered under the EAP to ensure employees are taking full advantage of the benefits provided to them through the EAP. Part of this education and promotion process should include focus on how their use of the EAP’s services is confidential (subject to certain exceptions related to health and safety).

For most employers, structuring an EAP as an excepted benefit will be the most practical solution when taking into account applicable legal requirements and necessary compliance efforts. This structure generally allows the employer to offer some form of counseling to the employees, along with referral services, both of which can provide efficient and impactful assistance. Employers will need to consider whether they will administer the EAP internally or contract with a third-party administrator. Utilizing a third-party administrator allows the employer to take a more hands-off approach in terms of the day-to-day administration and employee confidentiality and privacy. Employers should ensure that any counselors or consultants utilized by the EAP are trained professionals and that any services provided are provided through a range of platforms, including in-person and remote counseling, to ensure that the assistance provided to employees is most effective. To determine if you should offer an EAP, or expand the services offered under an existing EAP, you should reach out to your benefits consultants or third-party administrators to further evaluate the needs of your workforce and the legal considerations.