It has become common for companies to have employee assistance programs (EAPs) for things such as mental health, substance abuse, and financial challenges.
Whether your company is considering an EAP or already offers one, among the most important factors to keep in mind is compliance.
Whether your company is considering an EAP or already offers one, among the most important factors to keep in mind is compliance.
Start with ERISA
Several different federal laws may come into play with EAPs. A good place to start when studying your compliance risks is the Employee Retirement Income Security Act (ERISA). The law’s provisions address critical compliance matters such as creating a plan document and Summary Plan Description, performing fiduciary duties, following claims procedures, and filing IRS Form 5500, “Annual Return/Report of Employee Benefit Plan.”
Although most people associate ERISA with qualified health care and retirement plans, the law can be applicable to EAPs depending on how a particular program is structured and what benefits it provides. Generally, a fringe benefit is considered an ERISA welfare benefit plan if it’s a plan, fund or program established or maintained by an employer to provide ERISA-listed benefits, which include medical services.
The category of ERISA-listed benefits most likely to be provided by an EAP is medical care or benefits. Mental health counseling — whether for substance abuse, stress or other issues — is considered medical care. Accordingly, an EAP providing mental health counseling will probably be subject to ERISA. On the other hand, an EAP that provides only referrals and general information, and isn’t staffed by trained counselors, likely isn’t an ERISA plan.
Bear in mind that EAPs that primarily use referrals could still be considered to provide medical benefits if the individuals handling initial phone consultations and making the referrals are trained in an applicable field, such as psychology or social work. If an EAP provides any benefit subject to ERISA, then the entire program must comply with the law — even if it also provides non-ERISA benefits.
Check up on other laws
EAPs considered to be group health plans are also typically subject to the Consolidated Omnibus Budget Reconciliation Act (commonly known as “COBRA”) and certain other group health plan mandates, including mental health parity.
Also, keep in mind that EAPs that receive medical information from participants — even if the programs only make referrals and don’t provide medical care — must comply with privacy and security rules under the Health Insurance Portability and Accountability Act (HIPAA).
In addition, EAPs providing medical care or treatment could trigger certain provisions of the Affordable Care Act (ACA). EAPs meeting specified criteria, however, can be defined as an “excepted benefit” not subject to HIPAA portability or certain ACA requirements.
Cover all bases
Given the rising awareness and acceptance of mental health care alone, EAPs could become as common as health insurance and retirement plans in many companies’ employee benefit packages.
Whether you’re thinking about one or already have an EAP up and running, it’s a good idea to consult an attorney regarding your company’s compliance risks. Meanwhile, please contact your Rudler, PSC advisor at 859-331-1717 for help identifying and tracking the costs involved, as well as understanding the tax impact.
RUDLER, PSC CPAs and Business Advisors
This week's Rudler Review is presented by Jon Peul, Staff Accountant and Mark Benson, CPA, CVA.
If you would like to discuss your particular situation, contact Jon or Mark at 859-331-1717.
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