A Wellness Rewards program may seem like a win-win-win, but employers beware.
Just when you think you have seen it all….
Recently my brother contacted me about a wellness program his friend’s employer was putting in place. It sounded fishy to his friend, so he asked if I’d check it out. All I can say is, wow! And how do employers fall for these tricks?
The employer in question was offering a wellness program with a hefty price tag of $800 per employee per month. The program provides biometric screening, DNA testing, coaching, and more. As long as the employee touches base with their wellness coach once a month, the employee receives a reward of $600 per month. If you do the math, it is about break even to the employee because that $800 premium paid for with pre-tax dollars “feels like” about $600 coming out of their check.
Now, this type of arrangement is not new. What is new is that vendors are now pitching them as a voluntary, self-insured group health plan - basically a wellness program with “rewards.” Here’s the pitch: Acme Wellness provides a self-funded wellness program to the employer. Employees pay the full monthly premium through pre-tax payroll deduction. In return for completing a task (take a call from a wellness coach, complete a health questionnaire, etc.) the employee receives a reward.
What’s in it for the employer? Well, follow the money.
Granted, the employer would need to pay something to the vendor for providing this service. But as long as the vendor leaves some of the savings on the table for the employer, it looks like a win-win-win, right?
The (big) downside
Unfortunately, an unwitting employer using one of these wellness programs can be exposed to under-reporting and under-withholding penalties, as well as back taxes. In addition, the employer can be liable “secondarily” for the employees’ portion of FICA taxes.
Lawyers for these vendors provide convincing arguments negating most of the potential pitfalls, however, there is one issue they cannot get around. The Americans with Disabilities Act (ADA) restricts rewards under all wellness programs (including participatory programs) to 30% of the cost of self-only coverage.
Luckily this employer was able to avert this scam before being taken in. Just remember the old saying, if it sounds too good to be true, it probably is.
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I love numbers. I'm a math geek. I read benefits industry articles and periodicals for relaxation (but, honestly, I'm still a fun gal). I also like to share what I've learned and you'll find it all here.