Non-Taxable Wellness Incentives
Wellness programs and non-taxable incentives go hand in hand when it comes to keeping your employees motivated. Employer-sponsored wellness programs commonly incorporate rewards and incentives to encourage employees to participate in various health activities and health awareness sessions, yet not all the rewards and incentives may be doing the participants a favor.
That motivating reward you’re offering your employees for joining the company gym membership may be taxable – meaning it might land your employees in hot water if they don’t include it in their taxable income. So – how can you know the difference and choose the best wellness program incentive for your employees? The IRS released guidance on wellness programs in this document, but it’s a bit unwieldy; so we digested it below.
What Makes an Incentive Taxable?
The main divider is whether or not an incentive qualifies as an “eligible medical expense” under Code § 213(d) or “fringe benefit” under Code § 132. Cash and non-cash incentives, payments and rewards paid to an employee are not excludable from an employee’s taxable income merely because they are paid under an employer wellness program. Now the question is – how can you incentivize your employees without placing that extra burden on them?
5 Non-Taxable Wellness Incentives for Your Company
1. Reduce healthcare premiums
Motivate your employees and reduce their healthcare premium if they stopped smoking or if they lowered their cholesterol. This is a motivating behavior for employees to save money and essentially, their health!
2. Provide healthy snack days
Instead of having donuts in the office Friday mornings, try offering yogurt parfaits or breakfast muffins. A few quick swaps will end the week on a high note and make progress to better health.
3. Contribute to FSA's
Encourage your employees to undergo a cholesterol screening (or any other health screening) for a contribution to their FSA's, avoiding the reward to be taxed!
4. Branded water bottles, t-shirts, and company items
Need giveaway ideas for your wellness program? Between pedometers, fitness bags, t-shirts, coolers, sport water bottles, lunchboxes, etc. – your employees will be excited to represent their company in a health-conscious way.
5. Discounts on fitness items
Pair up with other companies and offer your employees a discount at their favorite athletic brand. This gives them the motivation (and tax-free) reward they deserve for participating in your company’s wellness program.
We cover only a sliver of non-taxable options for your wellness program incentives in this reading. Check out our on-demand webinar, How to Administer Wellness Programs in Today’s Regulatory Environment, hosted by topic expert, Larry Grudzien, for more tips and tricks.
Rewarding your employees is an important part of any wellness program, and a great way to appreciate and care for your employees. You are already headed in the right direction with your wellness program – just make sure your appreciation is more of a reward and not a secret burden.
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