Tax Tips
Employers Also Benefit From Employee Wellness Programs. - July 2006
Richard Scrivanich - Partner
Summertime…beaches, bathing suits, and other reasons to want to "shape up your bottom line," so to speak. How better to do that than doing so with tax-favored benefits?
If you are an employer looking to help your employees get or stay healthy, there are ways to offer wellness programs that will benefit your business as well as your employees.
Ask business owners of any size company about their costs and-time again-you'll hear complaints about constantly rising health insurance costs. One way to contain these costs is to reduce the number of claims that your employees file. Many companies are turning to wellness programs as a way to encourage healthy lifestyles, reduce the likelihood of workplace injuries, boost morale and productivity, and lower their overall health care costs.
Wellness programs include any program that promotes health or disease prevention. Examples include smoking cessation classes, subsidized gym memberships, lunchtime diet and exercise groups, stress management seminars, health screenings, and on-site gyms. As an employer, you have the flexibility to tailor the programs to the needs of your own employees.
Follow the IRS rules to reap the benefits
While offering wellness programs brings you the benefits listed above, you must carefully follow IRS rules (1) to deduct the costs of your program; and (2) to enable your employees to exclude these fringe benefits from their taxable income. And, if your group health plan is "qualified" under the Internal Revenue Service Code, you can offer premium discounts or rebates to employees who use the wellness programs.
Any wellness program that ties a reward to the program must meet several IRS requirements to avoid discrimination based on a health factor:
- The total reward given to any individual may not exceed a specified percentage of the cost of employee-only coverage under the plan (ranging from 10 to 20 percent);
- The program must be reasonably designed to promote good health or prevent disease (and give eligible individuals the opportunity to qualify for the reward at least once per year);
- The reward must be available to all similarly situated employees; and
- The plan must offer-detailed in writing-a "reasonable alternative standard" that will allow individuals who cannot satisfy the general standard because it is medically inadvisable or unreasonably difficult due to a medical condition.
If you have any questions regarding IRS rules for employee wellness programs or any other tax matter, please feel free to give me a call at (562) 698-9891.
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