Should reward amounts in different wellness programs be combined for the 30-percent rule?


Your employer sponsors a group health plan. The total annual premium for employee-only coverage (including both employer and employee contributions toward the coverage) is $5,000. The plan provides a $250 reward to employees who complete a health risk assessment, without regard to the health issues identified as part of the assessment. The plan also offers a “Healthy Heart” program, which is a health-contingent wellness program, with an opportunity to earn a $1,500 reward. Does the reward comply with the final regulations on wellness programs?


Yes. Even though the total reward for all wellness programs under the plan is $1,750 ($250 + $1,500 = $1,750), which exceeds the applicable percentage of 30 percent of the cost of the annual premium for employee-only coverage ($5,000 × 30% = $1,500), only the reward offered for compliance with the health-contingent wellness program ($1,500) is taken into account in determining whether the applicable percentage rules of IRS Reg. §54.9802-1(f)(5) are met. The $250 reward is offered in connection with a participatory wellness program and, therefore, is not taken into account. Accordingly, the health-contingent wellness program offers a reward that does not exceed the applicable percentage of 30 percent of the total annual cost of employee-only coverage.

Health-contingent wellness programs generally award the attainment of a specific health standard and include such programs as those that offer rewards for reaching a specified cholesterol level or body weight. Participatory wellness programs generally are those that reward mere participation.

Source: IRS Reg. §54.9802-1(f)(5)(ii), Example 4.

[ Return to top of document ]