HEA 1678 - Small Employer Qualified Wellness Program Tax Credit

         NOTE: Significant revisions made to tax credit since last article!

Steve Moore, Account Executive at Neace Lukens, provides this update…

 

Tax Credit is just that…a tax credit that applies to "small employers". The credit is for the 2008 tax year, regardless of when you have your plan certified. The deadline for submission of your program for certification is October 1, 2008. Any programs submitted after October 1, 2008 will be considered for 2009. The tax credit is for fifty percent (50%) of the costs incurred by the taxpayer (employer) during the taxable year for providing a qualified wellness program for the taxpayer's employees during the taxable year. The taxpayer shall submit to the department of health all information that the department determines is by this chapter.

A "qualified wellness program" means a wellness program that is certified by the state department of health under IC 16-46-13. For a wellness program to become an Indiana State Department of Health Certified Wellness Program, the plan must include all of the following components:

  • Employee appropriate weight loss;
  • Smoking cessation; and
  • Pursuit of preventative health care services.

Each of the above three components of the wellness program must meet the four criteria listed below to be considered for certification. Documentation must be provided for the criteria. Examples are provided, however, qualified items are not limited to the examples listed below:

  1. Assessments that serve as a means of evaluating health status of the employer’s workforce. To determine the particular area of wellness where your business should focus its efforts, administering a health risk assessment (HRA) is essential. An HRA assesses all aspects of wellness and can indicate what areas you should focus on when designing your wellness program.

    Examples of assessment tools: blood pressure/cholesterol screenings and/or blood-glucose screenings, body mass index (BMI), wellness survey, etc.
      

  2. Education materials which provide information to employees about each component of the wellness program.
     

    Examples: pamphlets, magazines, newsletters, posters, access to websites; on-site library, health fairs, screenings, lunch and learns.
     

  3. Rewards program that provides incentives for motivating employees to complete one or more of the components of the wellness program. These rewards need not be extensive.
     

    Examples: filtered/bottled water, extended break time for program participants, free healthy lunch, health related prizes and/or gift certificates, coupons/reimbursements for tobacco cessation medications, insurance premium credits, chair massages (company paid or employee paid).
     

  4. Measurement tool that can be used to evaluate the success and validity of each wellness program component.
     

    Examples:
     

      1. action steps – list or categorize what steps are being taken to make the business a healthier working environment for everyone involved
      2. upper management support – outline the course that upper management is taking to encourage and support employees during the implementation of the wellness plan
      3. participation – calculate the number or percentage of employees that are participating in certain wellness activities
      4. aggregate data – accumulate data that helps evaluate an ‘overall’ change during a specific period of time, biometrics, weigh-ins, etc.
      5. behavior change – monitor changes in the overall health of the business’s employees
      6. testimonials – acquire statements from employees describing how the program has positively impacted their lives
      7. employee satisfaction – measure the employees satisfaction with the program and regularly assess their needs for future components in an ongoing program
      8. comparative results – establish benchmarks for comparing results and improvements over short term and long term time frames

The format of your submission should look something like this:

Employee appropriate weight loss
    1. Assessments
    2. Education materials
    3. Rewards program
    4. Measurement tool

Smoking cessation

    1. Assessments
    2. Education materials
    3. Rewards program
    4. Measurement tool

Pursuit of preventative health care services

    1. Assessments
    2. Education materials
    3. Rewards program
    4. Measurement tool

The program must be submitted in this format and should not be more than 5 pages in length. All documents must be submitted electronically. To stay within the 5 page limit, just remember to keep it simple! For example, in the smoking cessation category, for the measurement tool, you could simply list "Visual observation during the work day; workers either smoked or did not smoke".

If you submit your application directly to the State for approval, there is a processing fee of $250. If you are already working with a Registered Vendor to implement a worksite wellness program, please notify your Registered Vendor that you would like to apply for the tax credit.  It is the responsibility of the Registered Vendor to submit the name of the small employer they are working with to implement a worksite wellness program.

A small employer is defined by Indiana law as an employer that:

     (1) is actively engaged in business;
    (2) on at least fifty percent (50%) of the working days of the employer during the preceding calendar year, employed at least two (2) but not more than one hundred (100) eligible employees, the majority of whom work in Indiana (A full time employee is defined as an employee who is employed to work at least thirty (30) hours each week).

    (b) In determining the number of eligible employees for purposes of subsection (a), employers that are affiliated employers or that are eligible to file a combined tax return for purposes of state taxation are considered one (1) employer.

If a qualified employer is entitled to a credit under this legislation but does not have state tax liability against which the tax credit may be applied, a shareholder, partner, or member of the entity is entitled to a tax credit equal to:

the tax credit determined for the entity for the taxable year; multiplied by the percentage of the entity's distributive income to which the shareholder, partner, or member is entitled.

Additionally, if the credit provided by this legislation exceeds the taxpayer's state tax liability for the taxable year for which the credit is first claimed, the excess may be carried forward to succeeding taxable years and used as a credit against the taxpayer's state tax liability during those taxable years.

To receive the credit provided by this legislation, a taxpayer must:

(1) submit to the department with the taxpayer's state tax return or returns a copy of the certificate received from the state department of health under IC 16-46-13 (approval of the employer’s program); and

(2) claim the credit on the taxpayer's state tax return or returns in the manner prescribed by the department.

This is an excellent incentive for small employers to provide incentives for their employees to engage in healthy activities. The anticipated results are healthier employees that will have lower utilization of their medical insurance, fewer workers compensation claims and fewer days of missed work in addition to a myriad of other benefits to the employee and employer.