Can an employer tie health/wellness incentives to "medical outcomes" (i.e. meeting/exceeding specific biometric screening results)?
This type of incentive contribution is allowed if these types of incentive contributions are made inside a Section 125 Cafeteria Plan. Outside a Section 125 plan, one cannot due to comparability. While incentives can be tied to participation or completion of wellness programs, it is not recommended that the employer tie any incentives to medical outcomes. This practice may present a challenge for employees to meet these outcomes and thereby brings a host of potential liabilities to bear, most significantly are potential violations of the Americans with Disabilities Act (ADA), and compliance with HIPAA privacy and non-discrimination requirements. This type of practice could evoke ERISA, making the HSA contributions subject to COBRA, among other liabilities. Before undertaking any plan for medical outcomes, we highly recommend to that the employer consult a qualified benefits attorney.