As the economy and public health situation gradually move to a more hopeful phase in Connecticut, employers and HR administrators will benefit from staying on top of current legal developments and trends in employee benefits. Let’s discuss two timely topics in employee benefits: (1) incentives for getting COVID-19 vaccines; and (2) extended time for employees to use balances in their health FSA and dependent care assistance program accounts.
Incentives for COVID-19 Vaccines: How Much Is Too Much?
As the state and national rollout of COVID-19 vaccines continues, some large employers have already stated their intentions to provide employees a few hours of PTO, or modest cash bonuses, to allow and encourage employees to get vaccinated. While certainly well intended, employers and HR departments should be mindful of certain legal traps surrounding these types of incentives.
In particular, the Americans with Disabilities Act (ADA) places strict limits on employers conducting medical examinations, or making disability-related inquiries to employees in connection with a “wellness program”. Wellness programs with incentives that include medical exams or involve questions that are likely to elicit information about disability generally must be voluntary. However, under current law, there is a lack of clarity about how generous an incentive may be in a wellness program before the program is no longer considered “voluntary”. As a result, last month a number of prominent trade groups including the U.S. Chamber of Commerce requested guidance from the U.S. Equal Employment Opportunity Commission (EEOC) on this very subject in connection with COVID-19 vaccines.
Good News for People Who Like Good News: Extended Time to Use FSA Balances
In 2020, significant balances in employees’ health FSA and dependent care assistance program accounts went unused due to the pandemic. Normally, these tax-favored benefits are subject to the cafeteria plan “use or lose” rules, under which unused balances are generally forfeited by employees at the end of a plan year, with limited exceptions. At the end of last year, Congress passed relief giving employees an additional 12 months to use any unused amounts in their health FSA and dependent care accounts from both the 2020 and 2021 plan years. However, because these extensions are optional to employers, cafeteria plans must be amended to allow them. As additional relief, the legislation gives employers additional time to adopt the required amendment(s). Employers have until the last day of the calendar year that follows the end of the plan year to which an amendment applies, so for calendar year plans, essentially an additional year to adopt the amendment.
The FSA relief also includes: increased flexibility to make mid-year enrollment changes; post-termination reimbursements from health FSAs for the 2020 and 2021 plan years; and special relief relating to when a dependent “ages out” of a dependent care assistance program during the COVID-19 public health emergency.