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November 5, 2021 | Covid-19 | Posted by Bob Greene, Senior HR Industry Analyst at Ascentis

New Guidance on Vaccine Mandates: Religious Exemptions and Incentive Tax Implications

Since September 9, 2021 employers of 100 or more employees across the U.S. have been waiting for the Occupational Safety & Health Administration (OSHA) to publish a new Emergency Temporary Standard (ETS) on COVID-19 vaccine mandates in the workplace. News from OSHA was that on October 12, they had completed their drafting, and the ETS had been submitted to the White House for approval. Then on November 1, news from the Office of Management & Budget (OMB) was all approvals were secured and the new ETS would be published in the Federal Register “in the coming days.” But federal agencies and the courts have not been idle on the issue of vaccine mandates during the past eight weeks. Two important sets of guidelines, as well as a flurry of court action, offer important guidance to all impacted employers.

Guidance From Departments of HHS, Treasury and Labor: Vaccine Incentive Tax Treatment

On October 4, the federal “Tri-Agencies” – Health and Human Services (HHS), Treasury (IRS) and Labor Departments – collaboratively released new guidelines, known as FAQ Part 50, interpreting the ACA and HIPAA on the issue of vaccine incentive treatment under the law. The guidance reiterated that vaccine incentives (including both group health plan premium discounts and penalties) are considered health-contingent, activity-only wellness programs, and therefore subject to certain previously issued regulations:

  • Group health plans may NOT deny eligibility for coverage or exclude coverage for covered services to treat COVID-19, based on an individual’s vaccination status.
  • Group health plans must immediately cover COVID-19 vaccinations and their administration once those vaccines are given Emergency Use Authorization by the FDA. The effective date of this provision is retroactive to January 5, 2021. (This is “old news” since virtually all group health plans had already done this.)
  • The vaccine incentive element of the wellness program must meet the five previously established criteria of all activity-only health-contingent wellness programs, including:
    • It must be reasonably designed to promote wellness or prevent disease,
    • It must provide a reasonable alternative standard to qualify for the premium discount, for those who have a medical condition, or for whom it is medically inadvisable to receive the vaccine,
    • It must provide notice of the availability of the reasonable alternative standard to all enrollees,
    • It must limit the incentive (or penalty) to no more than 30 percent of the total cost of the group health coverage, and when combined with a smoking cessation incentive (or penalty) to no more than 50 percent of the total cost,
    • It must give those eligible for the incentive (or penalty avoidance) the opportunity to qualify for it at least once per year.

Finally, one of the FAQs in Part 50 addresses the issue of the impact of vaccine premium incentives on plan affordability determination under the ACA. The FAQ clarifies that COVID-19 vaccine wellness incentives are to be treated as “unearned” for purposes of the employer mandate. This leaves intact the rule that tobacco use occupies a category of its own in terms of wellness incentives. From the FAQ verbatim: “those wellness program incentives unrelated to tobacco use that provide discounts to employees are disregarded in assessing affordability, while those incentives unrelated to tobacco use that impose surcharges on employees are taken into account in assessing affordability.”

Guidance from the EEOC: Religious Exemptions From Vaccine Mandates

On October 28, the EEOC released additional guidance on handling religious accommodations requested by employees to avoid vaccination. EEOC has been frequently updating a single “What You Should Know” (FAQ) document addressing COVID-19 and various employee protection laws (ADA, HIPAA, GINA, Rehabilitation Act, etc.) and the October 28 update is specifically found at Section L. The key takeaways from this latest update include:

  • It is incumbent on the employee to request the religious accommodation, but they need not use any “magic words” to do so (e.g., “Title VII” or “religious accommodation”).
  • The employer should provide employees and applicants with contact information and the procedure for requesting a religious accommodation.
  • Other forms of personal objection to accepting the vaccination (personal, political, social, economic or philosophical views), if not related to sincerely held religious belief, do NOT form a basis for vaccine exemption.
  • While employees enjoy a presumption that religious beliefs are sincerely held, the employer IS permitted to make inquiry into the nature of those beliefs. Employers should generally do so only with the advice of their legal experts to avoid further employee challenges.
  • Employers are not required to provide a religious accommodation that would impose an undue hardship to the employer’s business. Under Title VII, undue hardship is defined as an accommodation requiring anything more than a de minimis cost. Employers should avoid denying an accommodation based on hardships that are purely speculative in nature.
  • Factors an employer may take into account when deciding on religious exemptions to vaccination include whether the employee can fulfill their role working inside vs. entirely outdoors, from a home office vs. only in a group setting, and how close the employee is required to work near medically vulnerable individuals (among other factors).

Finally, an excellent resource for all kinds of expertise around considering COVID-19 related accommodations is the Job Accommodations Network, an employer resource which includes a handy template to use with employees requesting religious exceptions to vaccine mandate policies.

HCM Alert: While HRMSs represent excellent technological solutions for central consolidation of all information about an employee’s vaccination status, medical or religious exemption and accommodation information should be highly security restricted to only those with a business need to access it.

Will the Pending Federal Vaccine Mandates “Stick”?

Should employers ignore these mandates on the supposition that they will not survive legal challenges? Most employment law experts believe that the vaccine mandate will survive those challenges. The new rules that have been communicated so far are extremely deferential to existing employee protections. For example, most mandates so far have included exemption rules, on an employee-specific basis, for recognized ADA and EEOC protections, like medical conditions or sincerely-held religious belief. Note that a previous carve-out honored by many employers – an employee’s objection based on the “experimental” (or more accurately, Emergency Use Authorization) status of all available vaccines – expired on August 23, 2021, when the FDA gave full and final approval to the Pfizer-BioNTech vaccine. The fact that the expected ETS applicable to private sector employers also includes a weekly testing “opt-out” alternative will likely weigh in favor of the legality of that order.

Legal challenges to employer vaccine mandates, thus far, have not fared well. The Network for Public Health Law tracks these cases, and for the 65 cases they found over the six-month period ending October 26, 2021, they found:

  • 18 cases are still pending resolution,
  • 12 cases were dismissed by the court as non-justiciable, or withdrawn by the plaintiffs
  • 30 cases resulted in courts refusing to impose the requested injunction (i.e., upholding the mandates)
  • 1 case in which the court struck down a vaccine passport ban (i.e., upholding the state’s ability to issue vaccine passports)
  • 4 cases resulted in some degree of injunctive relief (i.e., “siding” with those objecting to the mandates); however, notably all 4 involved religious freedom arguments.

Finally, it should be noted that, although the Supreme Court has yet to rule specifically on employer-imposed vaccine mandates on the merits, or the executive branch’s ability to impose them, just last week the Court turned back a challenge to a vaccine mandate imposed on healthcare workers by the state of Maine, which did NOT include exemptions for sincerely-held religious beliefs. Although once again, this decision was purely procedural (through the emergency, or so-called shadow docket), simply turning back a request for an injunction and not a decision on the merits; notably, it was a 6-3 decision which assembled the three justices of the liberal wing of the Court with Chief Justice Roberts and Justices Kavanaugh and Barrett to form the majority.

Want to keep up with the latest general COVID compliance and specific vaccination mandate information for all segments of the employer population? Then register for our webinar, “Year-End Updates: HR Compliance and Vaccination Mandates.”

Bob Greene currently serves as Senior HR Industry Analyst at Ascentis. Bob’s 40 years in the human capital management industry have been spent in practitioner, consultant and vendor/partner roles. As practitioner, he managed payroll for a 5,000-person bank in New Jersey. As consultant, he spent 8 years advising customers in HRMS, and payroll and benefits system design as well as acquisition strategies. Bob also built a strategic HCM advisory practice for Xcelicor (later acquired by Deloitte Consulting.)