This site provides an overview of recent legislation on both a Federal and State level in regards to wellness tax credit options and related topics that will likely be of value in the development of your employee wellness strategy development. Please note that this site is made available for informational purposes only and you should always confirm all details prior to acting on the information provided.
Under the Patient Protection and Affordable Care Act (PPACA), there is not an actual wellness tax credit scheduled to be implemented. However, as was true previously, the expense of an employer-provided wellness program for employees is deductible as a business expense (section 162). The new regulations, scheduled to be implemented in January of 2014, further clarify previous wellness-related regulations as well as expand the options of employers.
Under these new regulations, incentives for “Health Contingent Wellness Programs” will expand to up to 30% of the value of the plan (50% if exclusively tied to tobacco cessation). “Participatory Wellness Programs” will continue to face no limits on incentives. If you would like more details about the PPACA, we have provided a copy of the proposed regulations on this site for your convenience.
The Federal Government has, at various times, seriously looked at the possibility of providing a tax credit to companies that establish a wellness program for employees. The help would take the form of tax breaks to offset program costs. Those proposed details are provided down below the most recent updates on tax credits.
Recent Wellness Tax Credits at the State Level
While the Federal Government has not yet implemented specific wellness tax credits, the states are beginning to do so. If you are aware of additional information that would be helpful to readers, please forward to Results@WellnessTaxCredit.com. Thank you.
- The Massachusetts legislature enacted legislation in late 2012 providing that employers that initiate a wellness programs for their employees will be eligible for an annual wellness tax credit of up to $10,000. The credit is in the amount of up to 25% of the cost of implementing an employee wellness program. Costs in the initial year that exceed that figure may be carried over into subsequent years for credit against future tax liabilities (please consult an accountant to confirm all details). The Massachusetts Department of Public Health is expected to issue regulations with further details tied to the tax credit in the near future.For employers who do not yet have a wellness program in place, this new tax credit provides an additional reason to do so. However, it is critical that wellness programs must be carefully designed and managed to comply with a myriad of applicable laws.
- Kentucky produced a study on the value of a worksite wellness tax credit that made strong recommendations in favor of the tax credit. The summary report can be viewed here: http://www.healthimpactproject.org/resources/document/Home-HIA-Executive-Summary-2012-FINAL-22212.pdf
- The mandated Small Employer Qualified Wellness Program Tax Credit (Indiana Code 6-3.1-31.2) provided (up until Dec of 2011) a state wellness tax credit of 50 percent of the costs incurred by an Indiana small business for providing a qualified wellness program to employees. It was introduced in 2007 and was funded by the cigarette tax that was introduced in the same year. However, a moratorium was placed on the Small Employer Qualified Wellness Program Tax Credit during the 2011 legislative session. The Indiana State Department of Health can no longer accept applications for a small employer to become qualified to receive the wellness tax credit. Small employers cannot be awarded for costs incurred by an Indiana small business after December 31, 2011.
Small Company Grants
$200 million in grant money to implement wellness programs
Companies with less than 100 employees who work more than 25 hours a week who do not currently have a wellness program can apply for a grant during a 5-year program beginning in 2011. This is referenced in Sec. 1048, and the program must include: 1) screenings and assessments; 2) methodology to encourage employee participation; 3) “initiatives to change unhealthy behaviors and lifestyle choices”, which would include counseling, seminars and online programs; 4) workplace policies to encourage healthier lifestyles in order for companies to qualify for part of the $200 million in grant money.
Proposals prior to Federal Focus on Patient Protection and Affordable Care Act
The expense of an employer-provided wellness program for employees is deductible by the employer as a business expense under section 162.
Under the option, a tax credit would be allowed for 50 percent of the costs paid by an employerfor providing a “qualified wellness program” during a taxable year. The amount of the creditwould be limited to an amount not exceeding $200 for each employee not exceeding 200employees, plus $100 for each additional employee in excess of 200 employees. Onlyemployees generally working more than 25 hours per week are taken into account. For purposesof this credit, any amount paid for food or health insurance could not be included as a cost of thewellness program. The credit would not be refundable and would not be paid in advance andwould be available for a maximum of five years.
To claim the tax credit for eligible expenditures, an employer would be required to obtain acertification by the Secretary of HHS (in coordination with the Director of the CDC and theSecretary of the Treasury) that its program meets the definition of a qualified wellness program.In order for a program to be a qualified wellness program under the proposal, all employeeswould be required to be eligible to participate in the program. Further, under the proposal, aqualified wellness program includes four components: health awareness (such as healtheducation, preventive screenings and health risk assessment); employee engagement (such asmechanisms to encourage employee participation); behavioral change (elements proven to helpalter unhealthy lifestyles such as counseling, seminars, on-line programs, self help materials);and a supportive environment (such as creating on-site polices encourage healthy lifestyles,eating, physical activity and mental health). For an employer with 500 or more employees, to bea qualified wellness program, a program would be required to include all four components. Foran employer with less than 500 employees, to be qualified wellness program, a program wouldonly required to include at least three of the four components.
In addition, to be a qualified wellness program under the proposal, the program would berequired to be consistent with evidence-based research and best practices, as determine by theSecretary, such as research and practices described in the Guide to Community PreventiveServices and Guide to Clinical Preventive Services and the National Registry for EffectivePrograms.
Finally, another option would apply all of the criteria described above as well as provide employers with 50 or fewer employees with a credit limited to $400 per employee. The credit would not have a sunset requirement for those employers.