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Wellness programs


Guest meeh3704
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There are two potential economic benefits to the employee. One is the value of the wellness testing or information that is provided at no cost to the employee. The other is the value of the 'rewards' for participating in the wellness program. For the rewards, the exception is the de minimis exception, as you mentioned. Whether they qualify depends on fitting IRC section 132. Is the reward a de minimis benefit one, considering its value and the frequency with which it is provided? To be de minimis, the benefit must be occasional or unusual in frequency. If the reward is a gift certificate that may be used toward a “significant variety of items”, it will be taxalbe no matter how de minimis in value. Such are taxable as a cash equivalent. For example, a $35 coupon that may be used at several local grocery stores must be included in the employees gross income and subject to FICA and FUTA taxes.

Wellness programs also provide diagnostic testing and/or information on healthy living habits. I've not considered this until I read your post. Since this has the same net effect as if the EE scheduled an annual physical, paid for it and was reimbursed by the ER under a MERP or HRA, you might want to make sure that the wellness program, both in breadth and depth, covers enough EEs to satisfy the nondiscrimination tests of IRC 105h. There is an exception to this nondiscrimination testing provided in Treas Reg § 1.105-11(g), if the wellness program does not go further than that. Also, if it could be argued that the wellness program is provided primarily to advance interests of the ER (i.e., help reduce its future costs for health care for its EEs), and the benefit to the EEs is merely incidental and therefore ought not be taxable to the EE.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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Guest meeh3704
There are two potential economic benefits to the employee. One is the value of the wellness testing or information that is provided at no cost to the employee. The other is the value of the 'rewards' for participating in the wellness program. For the rewards, the exception is the de minimis exception, as you mentioned. Whether they qualify depends on fitting IRC section 132. Is the reward a de minimis benefit one, considering its value and the frequency with which it is provided? To be de minimis, the benefit must be occasional or unusual in frequency. If the reward is a gift certificate that may be used toward a “significant variety of items”, it will be taxalbe no matter how de minimis in value. Such are taxable as a cash equivalent. For example, a $35 coupon that may be used at several local grocery stores must be included in the employees gross income and subject to FICA and FUTA taxes.

Wellness programs also provide diagnostic testing and/or information on healthy living habits. I've not considered this until I read your post. Since this has the same net effect as if the EE scheduled an annual physical, paid for it and was reimbursed by the ER under a MERP or HRA, you might want to make sure that the wellness program, both in breadth and depth, covers enough EEs to satisfy the nondiscrimination tests of IRC 105h. There is an exception to this nondiscrimination testing provided in Treas Reg § 1.105-11(g), if the wellness program does not go further than that. Also, if it could be argued that the wellness program is provided primarily to advance interests of the ER (i.e., help reduce its future costs for health care for its EEs), and the benefit to the EEs is merely incidental and therefore ought not be taxable to the EE.

I want to follow-up on your response. I am not referring to the taxability of an incentive or a reward under a wellness program.

What code section excludes from an ee's gross income the cost of an annual physical? The wellness programs for which I refer involves educational classes and some diagnostic testing, etc. The annual benefits of such services is approximately $400. Also, what code section excludes where the wellness program is provided primarly to advance interests of the ER, and the benfit to the EE is merely incidental?

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Internal Revenue Code § 105(h) and Treas Reg § 1.105-11(g).

As for incidental benefit to the employee, I know of no code/reg--merely suggested that it might be argued under concepts akin to those for employer provided meals (Internal Revenue Code § 119).

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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