The Departments of Labor, Treasury and Health and Human Services issued final regulations on June 3, 2013, that implement PHS Act section 2705, added by the Affordable Care Act (ACA), and existing provisions under ERISA and the Code. The preamble to those regulations stated that the Departments anticipated issuing future subregulatory guidance as necessary. Frequently asked questions issued on January 9, 2014, provide some of that additional guidance.
Some plan sponsors were uncertain as to how the final regulations applied when a participant, after declining an opportunity at initial or open enrollment to participate in a wellness program to avoid a tobacco surcharge, attempts to join the program in the middle of the plan year. Question 8 of the DOL’s FAQs confirm employers need not provide this “second bite at the apple” during the plan year:
No. If a participant is provided a reasonable opportunity to enroll in the tobacco cessation program at the beginning of the plan year and qualify for the reward (i.e., avoiding the tobacco premium surcharge) under the program, the plan is not required (but is permitted) to provide another opportunity to avoid the tobacco premium surcharge until renewal or reenrollment for coverage for the next plan year. Nothing, however, prevents a plan or issuer from allowing rewards (including pro-rated rewards) for mid-year enrollment in a wellness program for that plan year.
Some plan sponsors may desire to provide participants with more flexibility during the plan year to earn a wellness program reward or avoid a surcharge pertaining to tobacco cessation. However, other employers may find doing so creates a significant administrative burden, or they may believe multiple opportunities during the plan year weaken the influence of the incentive. Either way, this flexibility in design is likely to be welcomed by employers, even if not communicated before the 2014 calendar plan year.