Compliance October 30, 2015

EEOC Proposes Wellness Program Rule Under GINA

Previous proposed rules address wellness incentive issues under the Americans with Disabilities Act and not under the Genetic Information Nondiscrimination Act.
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The U.S. Equal Employment Opportunity Commission (EEOC) issued a Notice of Proposed Rulemaking (NPRM) to amend the regulations implementing Title II of the Genetic Information Nondiscrimination Act (GINA) as they relate to employer wellness programs that are part of group health plans.

The proposed rule would allow employers who offer wellness programs as part of group health plans to provide limited financial and other inducements (also called incentives) in exchange for an employee’s spouse providing information about his or her current or past health status. The proposed rule clarifies that an employer may offer, as a part of its health plan, a limited incentive to an employee whose spouse is covered under the employee’s health plan; receives health or genetic services offered by the employer, including as part of a wellness program; and provides information about his or her current or past health status. The limited incentive may take the form of a reward or penalty and may be financial or in-kind (e.g., time-off awards, prizes, or other items of value).

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The total incentive for an employee and spouse to participate in a wellness program that is part of a group health plan and collects information about current or past health status may not exceed 30 percent of the total cost of the plan in which the employee and any dependents are enrolled. The proposed rule also says that the maximum portion of an incentive that may be offered to an employee alone may not exceed 30 percent of the total cost of self-only coverage.

NEXT: Consistency with prior proposal

In April, the EEOC published an NPRM for public comment in the Federal Register, describing when a wellness program that seeks medical information from an employee is considered voluntary under the Americans with Disabilities Act (ADA). The proposed ADA rule set a limit on the level of incentives that may be offered in exchange for an employee's medical information. The previous NPRM did not address wellness incentive issues under GINA.

The incentive levels in the proposed GINA rule are consistent with those in the proposed ADA rule and with regulations under the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Patient Protection and Affordable Care Act (ACA), and the provisions of Title I of GINA governing health insurance, the agency says.

The EEOC believes the approach adopted in the new proposed rule harmonizes the two titles of GINA, which both regulate employer wellness programs that are part of group health plans, as a coherent whole. At the same time, EEOC is mindful that this change creates an exception to the general rule that no incentives may be provided for an employee's genetic information. Therefore, the agency has interpreted the exception as narrowly as possible. For example, the exception applies to information on the current and past health status of spouses, but not of children. The agency says the possibility that an employee may be discriminated against based on genetic information is greater when the employer has access to information about the health status of the employee's children versus the employee's spouse.

"Our goal in developing this proposed rule is to provide clarity for employees and employers," says EEOC Chair Jenny R. Yang. "We spent considerable time working with our partners at the U.S. Departments of Labor, Health and Human Services, and Treasury to construct a rule that protects workers and their families while encouraging wellness programs that benefit employers and employees alike."

The period to comment on the proposed rule lasts 60 days. A Q&A about the proposed rule is here. A fact sheet about how it would affect small businesses is here.
Investing October 30, 2015

Plan Sponsors Need Truth, not Jargon

Often, investment jargon is designed to market and not to inform, says Segal Rogerscasey’s CIO Tim Barron.
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There is lots of buzz in the retirement industry about smart beta, risk parity and responsible investing, but what do these terms actually mean?

In an Investment Brief, Segal Rogerscasey’s CIO Tim Barron points out that the investment industry often wraps complicated constructs into simplistic jargon, which doesn’t benefit asset holders, including retirement plan sponsors. “Some concepts are complicated, and they need to understand them,” he tells PLANSPONSOR. “The industry uses jargon in the guise of simplification when the goal should be understanding.”

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Even simple terms have been twisted to sound more appealing. For example, Barron notes that “drawdown” is becoming a more commonly used term to describe losses. Plan sponsors probably hear “drawdown” and think of taking a distribution from an account for spending. Or, Barron, notes, “it sounds like drawing down a lake, which will fill back up again.” While the term may be used to reflect the intention of an asset manager to somehow get that money back at some point, plan sponsors should know if their investment experiences a drawdown of 10%, that is a loss.

It has also become taboo to call a firm a product provider, so “solutions provider” is becoming the more acceptable jargon. “Would you rather me sell you a product or work with you to find a solution?” Barron queries to demonstrate why this sounds better to investors. But, the fact is, whether a client needs high-quality, large-cap value asset management or a customized approach to suit its specific needs, it will be sold a product.

NEXT: Providing meaning

“Plan sponsors need to separate themselves from the attractiveness of jargon and focus on meaning and importance,” Barron states.

He points out that investors in hedge funds were so disappointed by the losses they experienced last quarter. Many said, “I thought I was hedged.” Rather than using the term hedge fund or making a simple statement about what the fund hedges against, product providers should define what their role or objective is. “For example, say this is a fund that seeks absolute returns and is uncorrelated to global equity markets, or this is a long-short equity program that seeks to outperform the S&P 500 with less volatility,” Barron suggests. “Then the plan sponsor would say, ‘Ok, now I know what this is.’”

“Risk” is another term that needs a definition, because “risk is in the eye of the beholder; there are many ways to define risk,” Barron says. He also notes that “non-traditional” investments aren’t really non-traditional anymore. In the investment brief, he notes that a number of funds began investments in absolute return strategies, private capital, real estate, infrastructure, and oil and gas in the early 1980s—more than 30 years ago. “The industry really needs to come up with a different descriptor. How about absolute return strategies, private capital, real estate, infrastructure, and oil and gas?” Barron wrote.

“Responsible investing,” or “ESG investing,” or as the Department of Labor recently dubbed it, “economically targeted investing,” should also have descriptors, Barron argues. “Say this is a portfolio that uses environmental, social and governance factors as described by the UN Principles for Responsible Investing.”

"Smart beta” and “risk parity” are old concepts, Barron notes. “We used to call it factor-tilting. But, if a plan sponsor is asked whether they want to talk about factor-tilting, they may not. But, smart beta sounds exciting.”

Barron concludes that simplifying is designed to sell, not to inform. Full disclosure creates level expectations.

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