Some Wellness Benefits are Taxable

Stinson - Benefits Notes Blog

My colleagues blogged on recent wellness guidance from the Equal Employment Opportunity Commission (EEOC) and the three agencies charged with enforcing the Affordable Care Act (ACA), the Department of Treasury, the Department of Labor, and the Department of Health and Human Services. The guidance from the EEOC reiterated that compliance with HIPAA requirements for wellness programs is not sufficient. Employers must also comply with the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act.

The most recent guidance from the three agencies also mentioned that wellness programs must take into account the tax consequences of the program. The example the regulators used was the practice of subsidizing a health club or gym membership for employees who visit the facilities a minimum number of times during a month. As noted by FAQ XXV, that subsidy is taxable income subject to income tax reporting and withholding on an employee’s Form W-2.

Employers should take this guidance into account in evaluating the costs associated with including such a subsidy in a wellness program.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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