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Wellness surcharges may violate ERISA rules

Employees in Tennessee who have health insurance or other benefits through their employers may feel comfort in knowing those benefits are under the protection of the Employee Retirement Income Security Act. While not all such programs qualify for ERISA protection, those that do must maintain strict standards in administering the plans, including keeping participants informed of any changes and seeking the best interests of the beneficiary over those of the employer. Additionally, ERISA protects plan participants from any kind of discrimination.

One company in another state is understanding how severe the penalties can be for violating ERISA rules. The fiduciaries of the health insurance program charged participants a wellness surcharge if they used tobacco products. The federal government prohibits discrimination against plan participants based on the status of their health, and the federal district court where this occurred ruled that the imposition of a surcharge only for users of tobacco constituted discrimination.

Offering a reasonable alternative to the surcharge or the option of a waiver would keep the company in compliance with ERISA laws. However, since no options were offered, the court ordered the fiduciaries of the plan to pay nearly $150,000 to the 596 employees affected by the surcharge. The court order also includes a mandate for the company to change the policies of its wellness program to eliminate the surcharge and any other rules that do not comply with ERISA.

Tennessee employees who participate in employer-offered benefits plans may be unsure if their rights are being violated. It is important that plan participants understand the details of their plans and the limits ERISA places on plan fiduciaries. Those with questions or concerns can reach out to an attorney for answers and guidance.