What you need to know:

The Massachusetts legislature recently enacted legislation providing that employers that institute wellness programs for their employees will be eligible for an annual tax credit of up to $10,000

What you need to do:

For employers who have not yet established wellness programs, the new tax credit makes this an ideal time to do so.  However, wellness programs must be carefully crafted to comply with a myriad of applicable laws.

The Massachusetts legislature recently approved a bill that provides a tax credit of up to $10,000 to companies that establish wellness programs for their employees.  More specifically, the available tax credit is in the amount of up to 25% of the cost of implementing a wellness program, subject to an annual cap of $10,000.  However, costs exceeding that cap in the initial year may be carried over into subsequent years for credit against future tax liabilities.  The bill states that it is aimed primarily at small businesses, although that term is not yet defined.  The Massachusetts Department of Public Health is expected to issue regulations with further details relating to eligibility for the tax credit in the near future.

Important Considerations When Creating a Wellness Program

While the tax credit is a welcome development for employers, companies must carefully craft wellness programs to ensure that they do not run afoul of existing laws.  For example:

  • Wellness programs must meet certain criteria relating to the frequency, types and amounts of employee incentives offered, in order to comply with the Health Insurance Portability and Accountability Act.
  • Wellness programs that involve the collection of personal health information from employees must be voluntary, and there should be no penalty against employees who do not participate, in order to comply with the Americans with Disabilities Act and similar state laws relating to disabilities.
  • Questions about genetic or family medical history are to be avoided, or at least strictly limited, in compliance with the Genetic Nondiscrimination Act.
  • Medical information must be carefully safeguarded to avoid distribution in violation of HIPAA, the Massachusetts Data Security Law and other privacy laws.
  • Anyone involved in decision-making about the terms of an employee’s continued employment should not have access to medical information collected through wellness programs.
  • Employees with disabilities must be offered reasonable accommodations in order to enable them to participate in wellness programs.
  • State laws that prohibit discrimination against certain off-duty employee conduct (such as smoking) should be considered in creating the wellness program.
  • Wellness programs that offer significant reductions in health insurance costs may create additional taxable income for employees.

Consultation is Key

As this labyrinth of requirements and legal implications suggests, companies would be well-advised to consult legal professionals or experts in wellness programs in the course of creating their programs.  Fortuitously, the new tax credit creates a potential budget for doing so.  And, of course, in addition to the credit, employers can look forward to the substantial benefits of increased employee health, productivity and morale that result from well-designed wellness programs.