Some employers are considering offering wellness initiatives as an employee benefit. An employer-provided wellness plan or program does not have a formal set of defined requirements but is does typically include a collection of initiatives to promote a healthy lifestyle. Wellness benefits may consist of anything from healthy fruit in the break room, to gym discounts, to smoking cessation programs, to vaccines in the workplace.
Whether a wellness benefit is taxable to an employee depends on the specific benefit being offered. The determination is made while considering the IRS fringe-benefit tax rules. The basic rule is that all employee benefits are taxable to the employee unless there is an IRS-provided exception or the benefit is “de minimis.” Fruit in the breakroom might be considered a de minimis non-taxable benefit while a cash reward for participating in a smoking cessation program would likely be taxable.
Many health plans themselves include a wellness program component. For example, some insurance companies offer a cash reward for going to the gym a certain number of times per year, some insurance companies offer step counters at a reduced price and others provide discounts on weight management meetings. Some health plans include a financial reward for stopping smoking.
A wellness program, whether offered by an employer on its own or offered as part of a health plan, must comply with various legal rules. These rules include
- Americans with Disability Act (ADA). An employer cannot discriminate against an individual on the basis of disability. This includes discrimination on an employee’s access to a wellness program. For example, if the employer is offering a program in which anyone who walks 10,000 steps a day gets an extra day of PTO, that would be discriminating against someone who is unable to walk. The ADA would require the program to include a reasonable accommodation for someone who was unable to complete the step goal.
- The Genetic Information Nondiscrimination Act (GINA). GINA allows employers to request, require or purchase genetic information in connection with employer-provided health services only if the services are reasonably designed to promote health or prevent disease. If genetic testing or genetic information is in any way part of a wellness program, GINA will have to be considered.
When a wellness program is part of a health plan, and not just an employer-provided benefit, additional requirements must be followed.
- The HIPAA privacy/security and nondiscrimination requirements apply when a wellness program is part of a health plan.
- The Affordable Care Act requires that wellness programs must be reasonably designed to be available to all similarly situated individuals. ACA separates wellness programs into two types: participatory and health-contingent
- Participatory plans are available without consideration of an individual’s health status. Either no reward is offered (for example, sign up for a webinar about healthy eating) or the conditions for getting a reward are based on participation and not results (for example, get a 20% discount at a local fitness center).
- Health-contingent plans have two sub-components: activity-only and outcome-based
- An activity-only program requires completion of an activity to get a reward. For example, walking 10,000 steps a day for a month to get a reward is an activity-only program.
- An outcome-based program requires reaching a certain goal to get a reward. For example, getting a reward if BMI is lowered by a certain amount is an outcome-based program.
- Health-contingent programs must meet the following requirements:
- Give individuals the ability to qualify for the reward at least once per year
- The total reward must not exceed a certain percentage of the cost of employee-only coverage under the plan
- The program must be reasonably designed to promote health and prevent disease
- The full reward must be available to all with alternatives if someone cannot participate
- The plan must make certain written disclosures.
Employers who are setting up wellness programs should decide if the program is part of the health plan or is a stand-alone employer-provided benefit. Many times, employers may group together certain discounts or programs and market the program as “wellness plan.” The tax implication of each offered benefit would have to be considered individually. As employees are expecting more and more from the workplace, employers may want to consider offering wellness initiatives.
