Benefits and Compensation

Handy Checklist—Avoid Wellness Program Lawsuits

Jones, who is a partner at Pillsbury Winthrop Shaw Pittman LLP in Los Angeles, offered his wellness guidance at a recent Benefits Bootcamp sponsored by BLR® and HR Hero®.

Lawsuit Avoidance Checklist for Your Wellness Program

    • Keep corporate wellness and employment decisions separate. Achievement on a health program shouldn’t be a basis for promotion, for example.
    • Use a third party, such as your insurance provider, to run your wellness program. They have more experience in designing programs, and all of the protected health information goes to them.
    • Have your health insurance provider do your program—it’s simpler and all the protected health information is in one place.
    • Limit participation to participants in your health plan.
    • Include the wellness program in your Summary of Plan Benefits and other health plan materials.
    • Focus on voluntary wellness activities, such as employer-paid annual physicals, on-site exercise facilities, and smoking cessation programs. (If there are conditional rewards on achieving a health goal, you have to put a lot of protections in and offer alternatives.)
    • Aim for participation, not performance.
    • If you do offer a reward for meeting a health standard, then make an alternative available for employees who cannot meet the standard.
    • Enter into a business associate agreement with your wellness provider, and include an indemnity for any failure to safeguard PHI or genetic information.
    • If you must request medical information for an employee, direct the individual or provider not to provide genetic information.
    • If you have a health risk assessment, identify questions relating to family medical history as “optional.”
    • Train workers who implement and manage your corporate wellness programs to comply with the law and company policy.

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    Watch Out for Tax Consequences

    Don’t forget the tax consequences of your wellness program (for both you as the employer and your employees)!, says Jones.

    • Rewards that take the form of cash or cash equivalents (for example, gift cards) are taxable, and must be reported on the employee’s W-2.
    • Discounts or waivers of premiums, copayments or deductibles, or employer contributions to health savings accounts (HSAs) and flexible savings accounts (FSAs) are generally not taxable.
    • Other rewards are generally taxable (for example, exercise equipment, weight loss club memberships).
    • However, “nontaxable fringe benefits” (for example, employee discounts on employer products, on-site gyms) are not taxable.

     

    Employers should obtain guidance from a tax professional before offering a wellness program, as tax laws are complex and change frequently.

    Tax consequences of wellness programs, just add one more to the list of comp and benefits’ daily challenges. “Maintain internal equity and external competitiveness and control turnover, but still meet management’s demands for lowered costs.” Heard that one before?  

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