Dive Brief:
- Workplace Wellness programs continue to gain popularity, but for employers who offer financial incentives in the form of gift cards or gym memberships, there cold be tax complications, according to Forbes.
- Janet Berry-Johnson, a CPA and guest columnist at Forbes, writes that a recent Chief Counsel Advice (CCA) memorandum from the IRS indicates certain benefits provided by workplace wellness programs are taxable income to the employee.
- She writes that the IRS' position is that cash rewards/reimbursements are taxable income to the employee, subject to income tax withholding and payroll taxes unless they are made to reimburse employees or dependents for medical care expenses through a healthcare or accidental plan.
Dive Insight:
Berry-Johnson writes that the memorandum should remind employers to evaluate their current wellness program designs and prepare to make changes, if needed, prior to the 2017 open enrollment period later in 2016.
She notes that any "reward, incentive or other benefit" that is not medical care must be included in an employee’s income though there are some exclusions, including low-value items such as healthy snacks, water bottles, t-shirts or even "an occasional movie or sporting event ticket."
But cash incentives, no matter what their value, need to be part of an employee’s gross income. Now's the time, she writes, to ensure wellness plan designs comply with CCA interpretation.
HR should be out front of this, in case it's never been done before (adding the value of wellness cash incentives to W-2s), because it could generate some negative feedback from employees unless they understand the reasons behind it.