Wellness Programs 101 :: Wamhoff Financial & Accounting

Wellness Programs 101

By: Sandy Furuya

Employer sponsored wellness programs have grown in numbers. A recent survey found that employees who invest in workplace wellness programs saved on their health insurance premiums, reduced the amount of absenteeism and time off for medical care, and enjoyed greater productivity and improved employee morale!

Many employees participate in a wellness program through their employer without charge, regardless of whether they also participate in the employer’s health plan. Because the program features health screening and other health benefits, it qualifies as a health plan under the IRS Section 106.

In addition to the above health benefits, the participants may earn rewards for gym memberships or other cash rewards. Any reward, incentive, or other benefit provided by the program that is not medical as defined under Section 213(d) is to be included in the employees’ income, unless it is excludible as an employee fringe benefit under Section 132.

So what is excludible under Section 132? Section 132 defines a “de minimums fringe” as any property or service, the value of which is so small as to make the accounting for it unreasonable or administratively impractical. For example, a gift of a t-shirt or a water bottle would not be a taxable event; however cash award, a gift card, or a gym membership would be subject to tax.

Never assume that the incentive is not taxable because it relates to medical care!