Well Wisconsin - Workplace Screening and Taxability of Wellness Incentives
Overview of Well Wisconsin
Employees, their spouse/domestic partner and adult dependents (18 years and older) covered under the State of Wisconsin Group Health Insurance program are eligible* to participate in the Well Wisconsin program. Participants receive a $150 incentive for completing a biometric screening and a Health Risk Assessment (HRA). HRAs are administered by the individual health plans and can be located by following the links provided on the Well Wisconsin website. For complete information on the Well Wisconsin incentive visit wellwisconsin.wi.gov.
Taxability of Health Plan Issued Incentives
This is intended to make you aware that the federal government requires the Well Wisconsin incentive, and all other wellness financial incentives issued to you and your enrolled family members by your health plan, to be treated as wages by your employer and are subject to income and payroll taxes.
ETF, in conjunction with DOA, has confirmed that the Internal Revenue Service considers wellness incentives taxable income. Incentives are required to be reported on the employee W-2 as income and are subject to payroll taxes. This includes, but is not limited to cash, gift cards and other cash equivalents issued for:
- completion of a biometric screenings and health risk assessments, including the $150 Well Wisconsin incentive;
- reimbursement for wellness expenses such as gym memberships, fitness classes, and/or the cost to participate in Community Supported Agriculture (CSA); and
- participation in health or wellness programs or challenges.
Effective with incentive payments made in 2014 and forward, health plans will be required to submit incentive payment information to ETF for distribution to employer payroll centers. This will include incentives issued to the employee, their spouse/domestic partner and adult dependents. ETF will distribute this information to employer groups in late November. ETF collection of the incentive payment data and subsequent distribution to the appropriate employer group is in the ordinary course of business for wellness incentives available as part of employer provided group health insurance and does not violate the Health Insurance Portability and Accountability Act (HIPAA).
According to the federal government and the Internal Revenue Service (IRS) these benefits are classified as a fringe benefit that must be treated as a taxable wage subject to income and payroll taxes.
What this means for you:
Beginning in 2014 financial incentives will be reported by your employer as a taxable wage and will be subject to applicable withholdings and taxes. You will see withholdings for all incentives issued in the current calendar year reflected on your December pay stub. This will include incentives issued to your eligible family members.
- Withholding will include 7.65% for Social Security and Medicare and may include withholding for federal and state taxes, depending on the number of exemptions you claimed on your W-4.
- Federal regulations require the payroll centers to receive financial data regarding incentives issued to employees and their covered family members. Your health information is protected by federal privacy regulations and is not shared with your employer.
- Due to the year-end reporting, health plans will delay incentives normally paid during the month of November and December until the next tax year.
Regardless of the federal government’s tax regulations, eligible employees are able to receive substantial financial rewards for utilizing the wellness incentives offered by the State of Wisconsin and participating health plans. Benefits available through the Well Wisconsin program are also available to any dependent over the age of 18 who is covered by your State of Wisconsin insurance plan.
If you have any questions or concerns feel free to contact ETF at 1-877-533-5020 (toll free) or 608-266-3285 (local Madison).