Health Risk Assessments - Incentives Taxable?

[Guest AKW]

If an employer provides a $50 Amex gift card to employees who complete the HRA, is that somehow taxable income to the employee?

The vendor handles the distribution of the cards, and does not provide a list of employees who received the incentive, citing HIPAA.

[GBurns]

At $50 it should not qualify as a gift and since it is not a reimbursement of a medical expense, it seems that it should be taxable income, but that is just my off the cuff gut reaction, I really have not looked into it.

A problem I see is who and how it gets reported or even recorded. The vendor would not be reporting it on a 1099 and the employer seems to have no way of including it on the payroll or otherwise. That leaves it up to the employee.

I would have thought that the answer and legal support for any position taken regarding the taxation, should have been provided by the vendor as part of their technical support.

You might also want to ask a few of the large firms that have a similar program, How they treat it and why.

[Guest b2kates]

NOT ALL GIFTS ARE TAX FREE

The IRS has recently issued an opinion that gift certificates, gift cards, gift coupons which have a face value on them are considered cash equivalents and therefore are subject to employment taxes without regard to their value. This includes gift certificates which cannot be converted to cash. It also includes theater tickets and tickets to sporting events. Gift certificates or gift cards to the Bookie, Home Depot, Nordstrom, etc., which are given to employees for any reason and for any amount are taxable to the employee

One employer gave its workers holiday gift baskets consisting of turkeys and hams. Some employees complained that they were vegetarians, so the employer decided to give gift certificates instead. Unfortunately, the IRS required employees to pay income tax on the gift and payroll taxes had to be withheld as well. Because the gift certificates set specific cash values, they did not escape being included in the employees’ income as “de minimus fringe benefits.”

Lesson learned: All fringe benefits, unless specifically excluded by law, are taxable to employees based on their fair market value, and the employer is responsible for withholding all appropriate federal income and other employment-related taxes from the recipient’s cash compensation. Holiday gifts (other than cash) that have a low fair market value are generally considered “de minimus” and are not subject to taxes.

IRS Technical Advice Memorandum 200437030

[leevena]

I am a little confused about why the vendor would not be able to tell the employer who participated and received the gift certificate. You state HIPPA does not allow such notification, which comes as a suprise to me. Am I missing something here, what HIPPA sensitive information is being provided to the employer?

[ERISAatty]

I disagree that HIPAA would prevent the vendor from telling the employer which employees partricipated.

HIPAA prevents the vendor from telling the employer anything about results, but participating info, particularly in this context, in which the exchange of info relates to a payment issue, should be exempt from HIPAA.

HIPAA administrative simplification rules (including privacy rules) do not apply to information disclosed for purposes of treatment, payment, or operation.

[oriecat]

It also includes theater tickets and tickets to sporting events.

b2kates, I agree with everything you posted, except the above. These 2 items are specifically excluded as de minimus benefits in the Regulations.

But yes, if the employer is the one actually providing these certificates, they are W-2 taxable wages. There is simply no exclusion for any form of cash given, and gift certificates are considered as cash.