Employee Assistance Program (EAP)

An employee assistance program is a benefit under which an employer pays a vendor to provide employees, and often their household members, with short-term confidential counseling and referrals for personal problems. Federal law does not require one, and no statute defines what one must contain. What federal law does is describe when the arrangement escapes the rules that govern group health plans.

The Internal Revenue Service's own description, in an example in Notice 2004-50, is the clearest available picture of the standard product: a program offered "regardless of enrollment in a health plan", "specifically designed to assist the employer in improving productivity by helping employees identify and resolve personal and work concerns that affect job performance and the work environment", whose benefits "consist primarily of free or low-cost confidential short-term counseling to identify an employee's problem that may affect job performance and, when appropriate, referrals to an outside organization, facility or program to assist the employee in resolving the problem." The subjects the example lists are substance abuse, alcoholism, mental health or emotional disorders, financial or legal difficulties, and dependent care needs.

That range is wider than most employees assume, and the legal and financial referral side in particular is the half people forget they have.

The four conditions, and why they matter to you rather than to your employer. 29 CFR 2590.732(c)(3)(vi) provides that benefits under an employee assistance program are "excepted" — outside the federal rules that govern group health coverage — only if all four of the following are met:

• (A) The program does not provide significant benefits in the nature of medical care. The amount, scope and duration of covered services are all taken into account.
• (B) The benefits are not coordinated with benefits under another group health plan. Two things are spelled out: participants in the other plan must not be required to use and exhaust the EAP first, making it a gatekeeper, and eligibility for the EAP must not depend on participating in another plan.
• (C) No employee premiums or contributions are required as a condition of participation.
• (D) There is no cost sharing under the program.

Conditions (C) and (D) are the reason an EAP is free at the point of use. They are not a courtesy; they are the price of staying outside the group health plan rules. Condition (B) is the reason an employer cannot make you talk to the EAP before your therapy claims will be paid.

What happens if the program fails the test. It becomes a group health plan, and the whole apparatus that follows a group health plan attaches to it: continuation coverage rights on a qualifying event, the plan-disclosure obligations of the Employee Retirement Income Security Act, and the rest. That is a compliance question for the employer, but it has one consequence a reader can feel directly, and it is the next point.

The health savings account question, which is the one people actually ask. Contributing to a health savings account requires you to have no disqualifying coverage beyond a high deductible health plan. Notice 2004-50, Q&A-10 answers the EAP case directly: "An individual will not fail to be an eligible individual under section 223(c)(1)(A) solely because the individual is covered under an EAP, disease management program or wellness program if the program does not provide significant benefits in the nature of medical care or treatment, and therefore, is not considered a 'health plan' for purposes of section 223(c)(1)." The Notice adds that in judging whether a program provides significant benefits in the nature of medical care, screening and other preventive care services are disregarded.

Note that this is a different test from the four-part excepted-benefit test above, even though it shares condition (A). A program could charge a small fee, failing condition (C) and so failing to be an excepted benefit, while still not being a health plan for health savings account purposes. Two regimes, one shared element, two separate answers.

The practical boundary is depth, and it is worth knowing where it sits. An EAP that offers a handful of counseling sessions and then refers out is comfortably on the safe side of both tests. An EAP that has grown into something resembling ongoing treatment — a long course of sessions, or services that duplicate what the medical plan covers — is the case where employers get advice, and it is also the case where an employee who is contributing to a health savings account should ask.

Confidentiality is the question the page cannot answer for you, and the honest version of the answer is a procedure. No general federal statute sets a single confidentiality rule for every EAP. What governs a particular program is the employer's contract with the vendor, the notice the vendor gives participants, and the professional licensing and ethical obligations of the counselor doing the work, together with whatever mandatory-reporting and imminent-harm exceptions apply where the counselor practices. So the useful move is to ask the program directly, before the first session, two specific questions: what information about your use of the program reaches your employer, and in what circumstances the counselor is required or permitted to disclose something. Both answers should be in writing, and a program that cannot produce them is telling you something.

1. The employer contracts with a vendor and pays for the program. The employee pays nothing, because a required employee contribution would break condition (C).

2. The employee contacts the vendor directly, not the employer, usually through a dedicated phone line or portal.

3. The program provides a short course of counseling, commonly written into the contract as a set number of sessions per issue per year, or a legal or financial consultation.

4. Anything longer is referred out, to the medical plan, to a private provider, or to a community resource. That referral point is where the regulation's "not significant benefits in the nature of medical care" line effectively sits.

5. Nothing may be conditioned on it. The medical plan cannot require you to use the EAP first, and the EAP cannot require you to be in the medical plan.

A hypothetical illustration of what the benefit is worth. Elena's employer offers an EAP with six counseling sessions per issue per year at no cost. She uses all six after a bereavement. Suppose a session with a comparable private therapist would run $180. The counseling she received is worth 6 × $180 = $1,080, and none of it went through her medical plan.

That last clause is the part with a second-order effect. Because the EAP is not the group health plan, the $1,080 did not run against her deductible, and it did not generate a claim. If she is enrolled in a high deductible health plan and contributing to a health savings account, it also did not disqualify her, because a program of this depth is not a health plan under Notice 2004-50. Had the same six sessions been paid by her medical plan, they would have come out of her deductible instead. All figures are illustrative.

Pros

• It costs the employee nothing to use, because a required contribution or any cost sharing would disqualify the program as an excepted benefit.
• The subject range is wider than counseling alone, and the legal and financial referral services are routinely unused.
• Where the employer's contract extends coverage to household members, they use it at no extra cost on the same terms.
• Using it does not run against a medical plan deductible and does not generate a health insurance claim.
• For someone contributing to a health savings account, an EAP of ordinary depth does not disqualify them.

Cons

• It is short-term by design. A program that provided significant benefits in the nature of medical care would stop being an excepted benefit, so the depth limit is structural rather than stingy.
• Confidentiality is set by the vendor's contract and the counselor's professional obligations rather than by one clear federal rule, so it has to be checked program by program.
• The employer chooses the vendor, and the quality of the counselor network varies with that choice in ways an employee cannot see in advance.
• A program that has been built out into something deeper can raise a real health savings account eligibility question, which is exactly when nobody thinks to ask.
• Nothing requires an employer to offer one, and nothing requires it to continue.