EAP Excepted Benefit Rules: What Employers Need To Know
An employee assistance program can be treated as an excepted benefit, which keeps it out of many group health plan mandates. The federal regulations set four conditions, and a program has to meet all of them.
The Four Conditions
No Significant Medical Care
The program must not provide significant benefits in the nature of medical care. The amount, scope and duration of covered services are taken into account (29 CFR 2590.732(c)(3)(vi)(A)).
No Coordination With A Health Plan
The EAP cannot act as a gatekeeper that members must use and exhaust before getting benefits under another group health plan, and EAP eligibility cannot depend on enrolling in that plan (29 CFR 2590.732(c)(3)(vi)(B)).
No Premiums Or Contributions
No employee premiums or contributions can be required as a condition of participating in the EAP (29 CFR 2590.732(c)(3)(vi)(C)).
No Cost Sharing
The program cannot impose cost sharing on participants (29 CFR 2590.732(c)(3)(vi)(D)).
What Excepted Status Does
Market Reform Treatment
Excepted benefits are generally exempt from the federal group health plan market reforms that apply to ordinary medical coverage.
Same Rule In Three Agencies
The same text appears in the Department of Labor, Treasury and HHS regulations, so the analysis does not change by agency.
A Facts Test
Whether a program provides significant medical care depends on its design, so document how your program is structured.
Common Ways An EAP Falls Out Of Status
Heavy Counseling Benefits
A program that adds many visits or extended treatment starts to look like medical care. The test looks at amount, scope and duration, so review the design with counsel.
Linking The EAP To Medical Enrollment
Making EAP access depend on being in the medical plan breaks the coordination condition.
Charging A Copay Or Fee
Even a modest participant charge is cost sharing, which is not allowed for excepted status.
Requiring EAP First
Requiring members to use the EAP before they can reach medical benefits makes it a gatekeeper.
Where This Comes From
Regulations
29 CFR 2590.732(c)(3)(vi), with parallel provisions at 26 CFR 54.9831-1(c)(3)(vi) and 45 CFR 146.145(b)(3)(vi).
Final Rule
Excepted benefits final rule, Federal Register, October 1, 2014 (79 FR 59130).
Questions We Get
Does a free EAP automatically qualify as an excepted benefit?
No. Being free is only part of it. The program must also avoid significant medical care benefits and avoid coordination with another group health plan.
Can employees pay to join the EAP?
Not if the employer wants excepted status. The regulation says no employee premiums or contributions can be required as a condition of participation.
What counts as significant medical care?
The regulation looks at the amount, scope and duration of covered services and does not set a bright line. Because it is a facts-and-circumstances test, have counsel review your program design.
Can the EAP and the medical plan work together?
Not in a way that links them. The EAP cannot be a gatekeeper for medical benefits, and EAP eligibility cannot depend on enrolling in the medical plan.
Where do the rules come from?
They are in the Labor, Treasury and HHS regulations listed in the sources above, which use parallel wording.
Is this legal advice?
No. This page is general information, not legal advice. Rules change and facts differ, so confirm your situation with your attorney or tax advisor.
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Laws and rules referenced
29 C.F.R. § 2590.732 — Excepted benefits, including the conditions under which an employee assistance program is excepted from group health plan requirements.
This page is general information, not legal or tax advice. Rules change and facts matter, so confirm your situation with counsel or a qualified advisor.
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