Employee wellness programs help your team members improve their overall health and avoid chronic illnesses. And while these programs are excellent for employees, they also benefit your organization. Employees are healthier, more productive, and feel better cared for by the organization, and you can receive tax benefits for employee wellness programs.

Understanding Employee Wellness Programs

Employee wellness programs are initiatives to enhance your organization by providing resources for physical, mental, and emotional health. These programs offer a wide range of perks to help team members lead healthier lives, resulting in a more engaged and productive workforce and reducing healthcare costs for your organization and your team.

Wellness programs make a real difference in improving team health and overall wellness, promoting healthier lifestyles, and providing resources for preventive care. When team members are less stressed and in a good headspace, their performance improves. Wellness programs help reduce absenteeism, creating less disruption in daily work.

The positive work environment wellness programs create leads to higher team member engagement and job satisfaction. When your team feels valued and appreciated, they’re motivated to give their all. Investing in team member well-being and showing that you care helps you build a team that’s motivated, happy, and ready to take on anything.

Types of Employee Wellness Programs

You have options when it comes to what employee wellness programs you’ll provide access to for your team. The goal should be to support overall wellness—both physically and emotionally.

Physical Wellness Programs

A physical wellness program is a component of an overall employee wellness initiative that specifically focuses on promoting and supporting physical health and well-being. It encourages team members to adopt and maintain healthy lifestyle habits, engage in regular physical activity, and make choices that contribute to their physical well-being.

Physical wellness programs can include:

• Gym Memberships. Partnering with local gyms to provide discounted or subsidized gym memberships for team members allows them to stay active in the community.
• Fitness Classes and Activities. Offering a range of exercise classes, such as yoga, aerobics, or group sports, encourages team members to be physically active and exercise regularly.
• On-Site Health and Exercise Facilities. Offering access to on-site fitness facilities equipped with exercise equipment or exercise desks saves time for your team members. It also makes them more likely to take advantage of the convenience of these exercise opportunities.

Mental Health and Stress Management Programs

A mental health and stress management program helps employees cope with stress, build resilience, and maintain good mental health. These programs emphasize the importance of emotional well-being and create a supportive environment that addresses your team members’ challenges in their work and personal lives.

Mental wellness initiatives include:

• Counseling Services. Counseling services provide people with a confidential and safe space to discuss their concerns and challenges with a trained mental health professional. In recent years, teletherapy and online counseling have become increasingly popular. These platforms enable team members to access counseling services remotely, providing flexibility and convenience.
• Employee Assistance Programs (EAPs). EAPs are employer-sponsored programs designed to support team members facing personal or work-related challenges, like a death in the family or temporary homelessness because of a fire. EAPs offer various services to help employees address issues affecting their well-being, job performance, and overall quality of life.
• Mindfulness and Meditation Initiatives. Training and workshops on stress management techniques, such as mindfulness, relaxation exercises, and time management strategies help team members effectively cope with workplace and life stressors.

Nutrition and Healthy Eating Initiatives

Nutrition and healthy eating initiatives aim to educate employees about nutrition, provide resources for making healthier food choices, and create a supportive environment that encourages healthy eating behaviors. The goal is to improve overall well-being, enhance energy levels, and reduce the risk of chronic diseases associated with poor nutrition.

Encourage healthy eating through:

• Healthy Snack Options. Offer healthier food choices in workplace cafeterias, vending machines, or through partnerships with local restaurants.
• Nutrition Education. Provide information and resources on the principles of balanced nutrition, understanding food labels, portion control, and the benefits of a healthy diet.
• Wellness Challenges. Incorporate nutrition-related competitions into wellness programs, such as department cooking competitions or recipe exchanges. Organizing health and fitness challenges can motivate team members to eat healthy and incorporate physical activity into their daily routines.

Tax Benefits for Employee Wellness Programs

Helping your team by supporting their wellness may just seem like the right thing to do. But there also are tax benefits to doing so.

IRC Section 125, also known as a Section 125 cafeteria plan or flexible benefits plan, is a provision in the United States Internal Revenue Code that allows employees to pay for certain qualified benefits on a pre-tax basis.

These benefits may include:

• Health insurance premiums
• Flexible Spending Accounts (FSAs)
• Daycare or adoption assistance

Employees can lower their overall tax liability by using pre-tax dollars to pay for these expenses.

Employers benefit from IRC Section 125 because they don’t need to pay payroll taxes (such as FICA) on employees’ contributions to their cafeteria plan. The amounts reduce the taxable wage base for payroll taxes.

Contributions made to a cafeteria plan through salary reduction are also exempt from Social Security and Medicare taxes.

IRC Section 125 has specific requirements and limitations, and employers must establish and administer a compliant cafeteria plan to take advantage of its tax benefits. Tax laws and regulations can change over time, so it’s essential to consult with benefits specialists to verify federal compliance and maximize available tax advantages.

Overview of Tax Deductions and Credits

Tax deductions and credits are tools your business can use to reduce your overall tax liability. While both can result in tax savings, they operate differently.

Tax deductions are expenses or items that can be subtracted from your taxable income, reducing the portion of your income subject to taxation. Deductions lower your taxable income and, in turn, decrease the tax you owe.

Tax credits are dollar-for-dollar reductions in the actual tax owed. Unlike deductions, credits directly reduce the amount of tax owed. Tax credits provide a more significant tax benefit than deductions because they directly offset your tax liability.

Depending on your business’s unique circumstances, you may be eligible to receive tax deductions or credits for launching employee wellness programs.

IRS Guidelines and Regulations

As with anything relating to the IRS, specific guidelines and regulations must be met when implementing employee wellness programs.

IRS guidelines and regulations for IRC Section 125 include:

• Employee Elections. Employees must have the opportunity to make irrevocable elections regarding their participation in the cafeteria plan and the benefits they wish to receive. These elections should generally be made before the start of the plan year, although the plan can allow for changes due to certain qualifying events.
• Plan Documentation. Your organization must establish a written plan document outlining the cafeteria plan’s terms and conditions. The plan document should specify the benefits offered, eligibility requirements, employee contribution options, and any other relevant provisions.
• Nondiscrimination. Plans must comply with nondiscrimination rules so that the benefits provided don’t disproportionately favor highly compensated employees. The IRS has tests you can use to determine if a plan meets the nondiscrimination requirements.
• Reporting and Disclosure. Your organization must provide information to employees regarding the cafeteria plan, such as a summary plan description (SPD) and annual statements. Your organization must also report the total salary reduction contributions and the benefits offered through the plan to the IRS.

It’s vital for your organization to carefully review and understand the specific IRS guidelines and regulations pertaining to IRC Section 125 to introduce compliant employee wellness programs.

Financial Advantages of Employee Wellness Programs

Employee wellness programs provide various financial advantages for your bottom line. These advantages include:

• Cost Savings Associated with Healthier Employees. Having healthier employees leads to significant cost savings for organizations. It reduces healthcare expenses, decreases absenteeism, and improves productivity.
• Return on Investment (ROI) for Wellness Programs. To calculate the ROI for wellness programs, your organization will compare the implementation costs against the long-term financial benefits, considering the savings listed above.

Tips for Maximizing Tax Benefits

If you want to maximize the tax benefits of employee wellness programs, you must stay up to date on IRS regulations and document the process every step of the way.

Maximize the tax benefits of a new wellness program by embracing:

• Steps to Implement an Effective Employee Wellness Program. Assess your employees’ needs, set clear goals, and tailor the program to fit your organization.
• Strategies for Engaging Employees and Encouraging Participation. Find ways to communicate effectively with your employees, offer incentives and rewards, and get your leadership teams involved.
• Best Practices for Measuring and Evaluating Wellness Initiatives. Establish clear metrics that you can regularly evaluate and use to conduct an ROI analysis.

Learn More from ERC Provider

Implementing an employee wellness program brings benefits to employees and organizations. Benefits include improved productivity, reduced healthcare costs, enhanced employee satisfaction, and higher retention rates. Investing in employee wellness leads to a healthier and more productive workforce, contributing to your organization’s long-term success.

Contact ERC Provider today to learn more about how an employee wellness program could benefit your business.