Wellness programs are a firmly established way for employers to educate employees about physical, mental and emotional well-being while providing ways to engage in healthful behaviors. These programs typically include:
- Physical health initiatives (such as fitness challenges and gym access),
- Nutrition and lifestyle support (such as dietary consultations and smoking cessation classes), and
- Mental and emotional initiatives (such as an employee assistance program and stress management seminars).
Although results are far from guaranteed, a well-implemented wellness program can improve an organization’s financial performance by boosting morale and engagement, reducing absenteeism, and increasing productivity. However, there are risks to consider — not the least of which is compliance.
The big five
Various federal laws may apply to a wellness program. Five of the most important are the:
- Employee Retirement Income Security Act,
- Consolidated Omnibus Budget Reconciliation Act,
- Health Insurance Portability and Accountability Act,
- Americans with Disabilities Act, and
- Genetic Information Nondiscrimination Act.
It’s critical to know whether and how these laws affect your organization’s specific program design and administration. Be sure to consult a qualified attorney.
Other impactful laws
Believe it or not, beyond those five laws, there are others to consider. These include:
The Age Discrimination in Employment Act (ADEA). The ADEA prohibits employers from discriminating against employees and job applicants because of age in relation to employment and the compensation, terms, conditions or privileges thereof — including benefits. The ADEA’s protections apply to people who are age 40 or older and could affect wellness programs that decrease incentives, impose surcharges, or otherwise discriminate against these employees or groups of employees.
Title VII of the Civil Rights Act. A wellness program that makes distinctions based on race, color, sex (including pregnancy), religion or national origin would likely violate Title VII. Also, historically, the Equal Employment Opportunity Commission has taken the position that sexual orientation is inherently a “sex-based consideration,” and that an allegation of discrimination based on sexual orientation is an allegation of sex discrimination under Title VII.
The Fair Labor Standards Act (FLSA). The FLSA requires that covered, nonexempt employees be paid at least time and one-half the employee’s regular pay rate for time worked over 40 hours in a workweek. As employers promote participation in their wellness programs — particularly when health risk assessments are involved — they must carefully review whether the program could be considered mandatory. If it is, time spent completing the program may be deemed compensable under the FLSA.
The Internal Revenue Code. Although health benefits provided under a wellness program (such as diagnostic tests) are likely to be tax-free, rewards for participating in these programs might be taxable.
For example, plan premium subsidies or employer contributions to health Flexible Spending Accounts, Health Reimbursement Arrangements or Health Savings Accounts can be excluded from an employee’s income. Moreover, they aren’t subject to wage withholding or employment taxes if applicable nondiscrimination requirements are satisfied.
However, other rewards such as cash or cash equivalents — for instance, gift cards or gift certificates — are includible in employees’ income and subject to wage withholding and employment taxes.
Exceptions possible
Bear in mind that certain exceptions may apply to some of the laws we’ve mentioned. These are particularly worth exploring for smaller employers.
As mentioned, work closely with a qualified attorney when designing and administering your wellness program. Contact us for help assessing the costs and tax impact of such a program, whether it’s theoretical or already up and running.
© 2025 TopLine Content Marketing Team
