Legal Pitfalls for Wellness Programs of Prevailing Wage and Hourly Workers

Avoid these 6 Common Mistakes

In order to administer an effective wellness program for prevailing wage workers and hourly workers, you must first have a deep understanding of the laws that govern them. Some of these laws are:

  • Employee Retirement Income Security Act (ERISA)
  • Health Insurance Portability and Accountability Act (HIPAA)
  • Americans with Disabilities Act (ADA)
  • Genetic Information Nondiscrimination Act (GINA)

Unfortunately, this has been a big challenge for employee benefits sponsors. The laws are not well-aligned all the time since they were implemented at different periods and for different purposes. Failing to comply will result to tax penalties and government enforcement actions.

Here are some legal errors you might want to watch out for when you implement a wellness program for prevailing wage and hourly workers.

1.      Not knowing that the wellness program for prevailing wage workers and hourly workers is subject to ERISA

A wellness program should comply with ERISA if:

·       It is an employee benefits plan, program or fund

·       It is created or maintained by the employer

·       Gives benefits to the employee and their beneficiaries

If ERISA is applicable to the wellness program, check if it should be combined with another employee benefits plan to ease your burden in trying to comply with the law.

2.      Labeling participatory programs for prevailing wage workers and hourly workers as non-participatory

A wellness program is not participatory only if:

1) It requires a person to accomplish an activity in order to get a reward or

2) It requires a person to achieve or maintain a certain health standard in order to get a reward.

If it fits one of these two qualities, then it must comply with the rules of the HIPAA.

3.      Utilizing wellness programs as gatekeeper for health plans of prevailing wage or hourly workers

The ADA dictates that a wellness program should be voluntary and reasonably designed in order to promote health and lower the risk of diseases. Check if the wellness program being planned for prevailing wage workers and hourly workers involves answering to inquiries related to disability or medical examination. See to it that the employee benefits plan requirements does not include the wellness program as a gatekeeper.

4.      Not knowing that rewards from a wellness program are taxable

According to the IRS, cash or cash equivalents are taxable. Non-cash rewards are taxable depending on the situation.

For example, merchandise rewards are considered taxable while prevailing wage workers discount programs are no taxable. Taxable rewards should be reported on the hourly worker’s W-2, stating the taxes withheld.

5.      Providing too much incentives for tobacco cessation program

According to HIPAA and ADA, the incentives given from a wellness program should not exceed 30% of the total amount of the employee-only coverage. The HIPAA allows to increase the limit to 50% if the reward that exceeds the 30% limit is related to a tobacco cessation program.

6.      Not being compliant with notice requirements

Employers should take note of different notice obligations such as the rules stated under the ADA. For instance, ADA requires wellness programs that perform medical exams or collect medical information to give a notice that provides details on the medical information to be collected.

Remain Compliant with the Laws Related to Prevailing Wage and Hourly Workers Benefits with ARCHER JORDAN

Laws can be quite complicated and tricky. However, you still have to familiarize yourself with them as non-compliance can lead to penalties.

Don’t worry, ARCHER JORDAN can help! With over three decades in the industry, our fringe benefit experts can help make sure that the employee benefits you give to your prevailing wage workers and hourly hires are always compliant with the law. Call us today!

5-Easy Steps to Fringe Benefit Compliance

In this FREE guide we’ll show you how to create a fringe benefit plan that secures your business