Everything You Need to Know About Avoiding Discrimination in Your Employee Benefits Program

Employee Benefits: Laws and Regulations

Companies need to ensure their benefits programs are fair and inclusive. Many states have their own employment laws and regulations you have to follow in addition to federal rules.

Examples of national regulations your benefits programs must comply with include:

• Affordable Care Act (ACA). The ACAoffers provisions for employers to provide health benefits to employees. It also gives employees a host of consumer protections, in some cases including prohibiting discrimination in healthcare programs.
• Family and Medical Leave Act (FMLA). TheFMLAallows eligible employees to take protected leave for specified family and medical reasons. It prohibits prejudicial treatment and retaliation against employees taking time off.
• Age Discrimination in Employment Act (ADEA). This federal law prohibits employers from treating individuals 40 years of age or older differently than younger employees in several respects, including benefits.
• Americans with Disabilities Act (ADA).The ADA protects disabled people against discrimination. This makes it illegal to discriminate against employees with a disability, including excluding them from certain workplace benefits.

The Equal Employment Opportunity Commission (EEOC) is the federal body charged with enforcing such national employee protections. It offers publicly available guidelinesyou can use to assess if the benefits you provide are equal and identify potential areas of discrimination.

Employee Benefits that Could be Discriminatory

Employee fringe benefitsare compensations and support employers may provide to employees in addition to their salary. These are subject to non-discrimination rules, which means they should be offered to all employees regardless of race, gender, age, or other protected characteristics.

While you can in some cases offer different benefits to different employees, you should ensure your benefits are of equal cost or equal benefit to everyone. Let’s take a closer look at some common fringe benefits and how to implement them fairly.

Health Insurance

Group health plans must cover all full-time employees and cannot exclude employees with pre-existing medical conditions, such as disability or pregnancy. In some cases, health insurance benefits may be offered to older employees for a shorter period of time or in smaller amounts than they are offered to younger employees. This occurs when a program qualifies under the EEOC’s “equal cost” defense, which requires companies spend the same amount on the behalf of every employee. Given that the cost of providing health care increases as somebody ages, companies can at times offer a reduction to older employees if the business is spending just as much to provide that benefit as they spend on younger employees. 

Retirement Plans

Retirement plans like 401(k)s and pensions help employees save for their future. All employees should have equitable access and opportunity to participate in these offerings. Some laws prohibit discrimination related to 401(k) plans, such as the Employee Retirement Income Security Act (ERISA). An example of a discriminatory 401(k) plan, for example, would be a program that’s inaccessible to non-highly compensated employees (NHCE, or those that earn less than $150,000 in 2023), or potentially one with low NHCE participation levelscompared to highly-compensated employees.

The IRSprovides guidance to help companies choose a retirement planthat’s fair and non-discriminatory.

Vacation and Paid Time Off (PTO)

Your PTO policies should not discriminate against employees based on their gender, race, or age. If you offer more leave to some employees than others, is there a valid reason for the discrepancy? A valid reason to provide additional vacation, for example, would be based on the length of an employee’s service. Additionally, full-time employees will likely be eligible for more paid leave than part-time employees.

Wellness Stipends

Wellness stipends, or funds provided to employees to spend on wellbeing initiatives, are a popular way for employers to incentivize healthy habits among their workforce. While these can help your wellness program be well-rounded and accessible, you’ll want to make sure your plan is equitable. If you offer different stipend amounts or incentives to employees based on any protected characteristics, for example, your program could be seen as discriminatory.

Life Insurance Plans

Life insurance plans should be designed to ensure that all employees across the organization have access to coverage, regardless of their protected characteristics such as age or disability. 

This is another benefit where the EEOC’s “equal cost” rule may apply. Companies will sometimes provide less coverage to older employees under this provision, but any changes you make must comply with the guidelines provided by the EEOC. Businesses are responsible for ensuring their offerings follow these regulations. 

Best Practices for Fair Employee Benefits Programs

In addition to complying with applicable laws, many employers try to make sure their benefits program is designed for equitable outcomes. This means considering how your program can be optimized to provide equal access to health coverage, retirement security, and financial stability for all employees.

Here are four best practices to help you develop fair, non-discriminatory benefits programs at your company.

1. Keep a Close Eye on Eligibility Criteria

Consider reviewing any eligibility criteria before committing to any benefit plan. Assess whether these criteria exclude employees based on any protected characteristics like gender or sexual orientation, then double-check to make sure they are applied equally across the board.

2. Develop a Clear and Consistent Policy

Try to put together a written policy outlining the eligibility criteria and conditions of participation in your employee benefits program. Think about documenting special provisions for employees with disabilities or other additional needs. This will help ensure all your employees are aware of the terms and conditions of their benefits.

3. Seek Feedback From Your Employees

You’re unlikely to directly ask employees: “Does this benefit feel discriminatory to you?” But employee feedback can help you spot subtle indicators of discrimination in your benefits package. For example, some initiatives may be too expensive for many workers. So while you’re technically offering the same benefits to everyone, in practice you have perks from which only your highly-compensated employees can benefit.

Consider running employee benefits surveysevery quarter to understand which benefits employees use, which they don’t, and why.

4. Run Regular Audits

You may want to carry out regular audits of your program to make sure you’re not inadvertently discriminating against any protected groups. A good audit process to ensure compliance with all applicable laws includes reviews by both HR and legal representatives.

Build a Flex Benefits Plan Free from Benefits Discrimination

Creating a benefits package that is fair and equitable for all your employees isn’t just a legal requirement – it’s also the right thing to do. By following these best practices, you can foster an environment of trust and respect for all members of your workforce.

If you’re looking to overhaul your benefits program, or just make a few additions that can improve employees’ overall health and wellbeing, it may be time to start anemployee wellness program. Companies can use these programs to support many different aspects of their employees’ lives—such as financial, emotional, and physical wellness.

Interested in finding out how you can expand your benefits program without worrying about discrimination? Wellhub can help you foster a happier and healthier workforce, with access to thousands of fitness activities and dozens of wellness apps. Talk to awellbeing specialist today.