Corporate Biggest Loser program

[MSN]

Company decides to run Biggest Loser contest as part of wellness initiatives. Program has "entry fee" of $X, which is used to pay for medical/nutritional consultation during the contest. At end of contest, if individual goals are met, participants are returned $X (paid by Employer). Additional reward offered to winner.

Would the payment of this "entry fee" be a qualified distribution from an HSA account?

Thanks!

[leevena]

Company decides to run Biggest Loser contest as part of wellness initiatives. Program has "entry fee" of $X, which is used to pay for medical/nutritional consultation during the contest. At end of contest, if individual goals are met, participants are returned $X (paid by Employer). Additional reward offered to winner.

Would the payment of this "entry fee" be a qualified distribution from an HSA account?

Thanks!

I'am confused. Entry fee is charged and then returned if goals met. How is this related to the HSA? HSA money belongs to the insured, not the company.

[Lori Friedman]

If I'm reading your message correctly:

1. An individual pays an entry fee to his employer. The entry fee is held among the employer's general assets, presumably as a small liability on the employer's G/L.

2. When an individual meets his weight goal, the employer refunds that person's entry fee, thus eliminating the liability. The employer recognizes an expense for that individual's medical/nutritional consulting.

3. If an individual falls short of his goal, his entry fee is used to cover the costs of his own medical/nutionional counseling.

4. The "Biggest Loser" gets a prize, paid from the employer's assets.

Is that an accurate description of the arrangement?

[MSN]

That is an accurate description Lori.

[leevena]

Doubt if this can be done, if I understand the process as explained by Lori. Money for qualified expenses can be paid for via the HSA. But in this example, if the employee fails, the money paid from the HSA to the employer has already been spent, and on a non-qualified expense. If the employee "wins", the money paid is now refunded, and never spent on a qualifed expense.

[Lori Friedman]

The actual event occurs when an employee doesn't reach his weight-loss goal and forfeits his entry fee. When the employer uses the entry fee to pay for that individual's nutritional counseling and counseling, the money's no longer on deposit. The money's been indirectly spent by the employee for certain services. The question is whether HSA funds can cover that expense.

I agree with the general answer of "No". HSA disbursements are allowed for:

1. Expenses that would otherwise be tax-deductible within the meaning of I.R.C. Sec. 213. Such expenses are limited to costs that are medically necessary for "the diagnosis, cure, mitigation, or treatment of disease."

2. Over-the-counter medicines, but only if medically necessary.

"Medically necessary" doesn't include expenses for an individual's general well-being. Vitamins and other nutritional supplements can't be purchased through an HSA (unless the supplements are for preventing or treating an illness). The same rule applies to health club fees (unless the membership is directly related to some sort of exercise or activity, as prescribed by a health care professional, that alleviates a medical condition).

Unless someone's weight constitutes an actual illness (i.e. morbid obesity), or if weight is causing or exacerbating another medical condition, weight-loss programs don't meet the HSA test. Weight-loss promotes general fitness and physical well-being, but the resulting costs aren't medical expenses.