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The Wagner Law Group

The Wagner Law Group is a nationally recognized practice in the areas of ERISA and employee benefits, estate planning, employment, labor and human resources, investment management and real estate. 

 

Established in 1996, The Wagner Law Group has 28 attorneys engaged exclusively in employee benefits, estate planning and employment law. Six of our attorneys are AV rated by Martindale-Hubbell as having very high to preeminent legal abilities and ethical standards. The firm is among the largest ERISA boutiques in the country. Our practice is national in scope, with clients in more than 40 states and several foreign countries.

 

 

 

 

Contact Info

The Wagner Law Group

 

  Integrity | Excellence

  

Boston 

Tel: (617) 357-5200 

Fax: (617) 357-5250 

99 Summer Street 

13th Floor

Boston, MA 02110

 

Washington, D.C.

Tel: (202) 969-2800

  Fax: (202) 969-2568

800 Connecticut Ave., N.W.

Suite 810

Washington, D.C. 20006

 


Palm Beach Gardens 

Tel: (561) 293-3590
Fax: (561) 293-3591
7108 Fairway Drive
Suite 125
Palm Beach Gardens, FL 33418

   

Tampa

Tel: (813) 603-2959

Fax: (813) 603-2961

101 East Kennedy Boulevard

Suite 2140
Tampa, FL  33602 

 

San Francisco

Tel: (415) 625-0002

Fax: (415) 358-8300

300 Montgomery Street

Suite 600

San Francisco, CA 94104

 

St. Louis

Tel: (314) 236-0065

Fax: (314) 236-5743
100 South 4th Street, Suite 550
St. Louis, MO  63102 

 

 

www.wagnerlawgroup.com

 

 

 

February 15, 2017

 

 Health and Welfare Law Alert

 

 

 

  IRS Releases Guidance on Taxation of Fixed-Indemnity and Wellness Program Payments

 

 

 

 

 

The IRS's Office of Chief Counsel has released a Chief Counsel Advice ("CCA") memorandum to clarify the tax consequences of payments made from employer-provided fixed-indemnity health plans and incentives received from employer wellness programs. Below is a summary of the guidance provided in the CCA memorandum.

 

Background. Employer-provided fixed-indemnity health plans are voluntary benefits offered to employees through insurance policies. The CCA memorandum defines an employer-provided fixed- indemnity health plan as a plan that pays a fixed-dollar amount to the covered individual upon the occurrence of certain health-related events (e.g., a fixed amount paid for each day of hospitalization or for each doctor's office visit), regardless of the amount of medical expenses actually incurred. Because benefits are paid from fixed-indemnity health plans regardless of whether the payment actually reimburses the covered individual, there were concerns that such payments are taxable income for the covered individual.

 

The term "wellness program" generally refers to a health promotion and disease prevention program or activity offered by an employer to employees, and sometimes their spouses, either as part of the employer's group health plan, or separately as a benefit of employment. Examples of wellness programs include diabetes management programs, weight loss plans, and preventative health screenings. Examples of wellness program incentives include a discount on the employee's group health plan premium, cash rewards, or paid gym memberships.

 

CCA Memorandum. The CCA memorandum confirms the following:

 

Fixed-indemnity health plans. Benefit payments made from a fixed-indemnity plan are tax-free only if the covered individual has paid the premium on an after-tax basis. If the premium is paid entirely by the employer or by the employee on a pre-tax basis, any benefit payments are taxable for the employee.

 

Wellness program incentives. The value of coverage provided under an employer's wellness program is generally tax-free, and any payments made for medical care (provided by the wellness program) are excludable from the employee's income. However, any cash rewards (as opposed to employee health plan contribution discounts) from the wellness program are taxable to the employee if the rewards do not reimburse or pay for qualifying medical care.

 

 

The CCA memorandum is available at: https://www.irs.gov/pub/irs-wd/201703013.pdf

 

 

 

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This Newsletter is provided for information purposes by The Wagner Law Group to clients and others who may be interested in the subject matter, and may not be relied upon as specific legal advice.  This material is not to be construed as legal advice or legal opinions on specific facts. Under the Rules of the Supreme Judicial Court of Massachusetts, this material may be considered advertising.