MLR

Is Our Employee Assistance Plan Subject to COBRA and ERISA?

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Questions: Our company just began offering an employee assistance plan (EAP) that provides counseling services to employees. Is the plan subject to the Consolidated Omnibus Budget Reconciliation Act (COBRA)? What about the Employment Retirement Income Security Act (ERISA)? Are there special issues we should consider?

Answer: An employee assistance plan that provides counseling benefits will likely be subject to COBRA and ERISA.

Let’s Start with COBRA

The critical issue is whether the EAP provides medical care. If your EAP is staffed with trained counselors (whether internally or through an outside service provider) who actually provide the counseling, the EAP will most likely be considered a group health plan and will be subject to COBRA.

In contrast, if your EAP is staffed with non-trained persons who simply provide referrals to employees in need of counseling or medical treatment, then the EAP may not be subject to COBRA. COBRA EAP compliance can be frustrating and complex.

First, EAPs typically cover all employees, so complying with COBRA means sending initial and election notices to a broad population.

Second, EAPs often provide non-health care benefits (such as financial or job counseling); the non-health care benefits should be carved out when determining the COBRA premium and coverage.

Third, you must determine what other health benefits must be offered at open enrollment to a qualified beneficiary whose only coverage at the time of the qualifying event was the EAP. If a qualified beneficiary wasn’t eligible for other group health plan coverage at the time of the qualifying event, presumably only the EAP need be offered at open enrollment. But if the employee was eligible for (but not enrolled in) other group health plan coverage at the time of the qualifying event, then he or she must be given the opportunity to elect such coverage at open enrollment.

Some employers avoid administrative complexity by arranging with EAP carriers to extend coverage for 36 months beyond the qualifying event occurrence. In this way, there is no loss of coverage during the maximum COBRA continuation period and COBRA compliance is greatly simplified. Other employers limit EAP eligibility to employees who are eligible for the group health plan and wrap the EAP into the COBRA election for the group health plan.

Neither approach is ideal. In the first, the employer is providing continued EAP coverage to individuals with a very tenuous relationship to the employer, and in the second, the employer is depriving non-benefit eligible employees access to the EAP when this group may most benefit from access.

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Now, Let’s Look at ERISA

If your employee assistance program provides medical benefits, it’s likely to be considered a welfare benefit plan subject to ERISA. Moreover, it would generally be considered a group health plan subject to several other laws, possibly including health care reform. The extent of your EAP’s compliance obligations depends on how it’s structured and the benefits it provides.

EAPs typically offer a wide-ranging set of benefits to address circumstances that might otherwise adversely affect employees’ work and health. Benefits may include short-term mental health or substance abuse counseling or referral services, as well as financial counseling and legal services.

An EAP is subject to ERISA if it offers a benefit listed in the law and meets the other ERISA criteria (generally, if it is a plan, fund or program established or maintained by an employer to provide benefits to employees). 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 be considered an ERISA plan, while an EAP that purely provides referrals and general information and is not staffed by trained counselors likely is not an ERISA plan.

If an EAP primarily provides referrals to additional resources (rather than direct counseling), it still may be considered to provide medical benefits if the individuals handling initial phone consultations and making referrals are trained in an applicable field, such as psychology or social work.

If the EAP provides any benefit subject to ERISA, then the EAP as a whole is subject to ERISA, even if it also provides non-ERISA benefits.

If you determine that your EAP is subject to ERISA, then it should be evaluated for compliance with ERISA’s numerous provisions, such as plan document and summary plan description requirements, fiduciary duties, claims procedures and Form 5500 filings.

An EAP, which is a group health plan, will also be subject to certain other group health plan mandates, including mental health parity.

You should also consider whether your EAP is subject to health care reform. Most EAPs, by design, will not comply with health care reform but may qualify for an exemption if they do not provide “significant benefits in the nature of medical care” and satisfy certain other criteria. In addition, EAPs that receive medical information from participants — even if they only make referrals and do not provide medical care — should analyze compliance with HIPAA’s privacy and security rules.