Employee wellness benefits: what works and what to offer

What counts as a wellness benefit

• Wellness programs: health screenings, health risk questionnaires, coaching, challenges and education, often with rewards.
• Wellbeing allowances: a lifestyle spending account or stipend for fitness, mental wellbeing or nutrition.
• Access to care: primary care, urgent care, mental health visits, lab testing and help finding practitioners, often with low or no cost at the point of care.
• Tax-favored medical accounts: an HSA, FSA or HRA that pays qualified medical costs tax-free.
• Time and environment: paid time for appointments, flexible schedules, on-site fitness space.

What the research shows

The Illinois finding on who signs up matters for any employer reading vendor claims. Programs can look like they save money because healthier employees join, not because the program changed anyone's health. Ask any vendor whether its results come from a randomized comparison.

Rules for wellness rewards tied to a health plan

The Department of Labor describes two kinds of wellness programs offered with a group health plan:

• Participatory programs don't require meeting a health standard. Examples include reimbursing fitness center memberships or rewarding attendance at a health seminar. They must be available to all similarly situated people.
• Health-contingent programs require an activity (like a walking program) or an outcome (like a screening result or not smoking) to earn a reward. They must meet five requirements.

1. A chance to qualify for the reward at least once a year.
2. A total reward of generally no more than 30% of the cost of employee-only coverage, or 50% for programs aimed at preventing or reducing tobacco use. If dependents can take part, the cap applies to the cost of the coverage they're enrolled in.
3. A reasonable design with a real chance of improving health, not overly burdensome.
4. The full reward available to all similarly situated people, through a reasonable alternative standard (or waiver).
5. Notice of that alternative in all plan materials describing the program.

Other federal and state laws can also apply to medical questions and screenings. Have a benefits attorney review any wellness program before launch.

How wellness benefits are taxed

• Cash and gift card rewards are wages. IRS Publication 15-B (2026) says cash and gift cards are never excludable as de minimis benefits, and IRS Chief Counsel memo 201622031 concluded that cash wellness rewards are wages subject to employment taxes.
• Outside gym memberships are taxable. Only an athletic facility on premises the employer owns or leases and operates can be excluded.
• Medical care can be tax-free. Benefits that count as medical care, such as screenings provided through a health plan, can generally be excluded. The memo draws this line.
• Allowances are taxable. An LSA or health insurance stipend is generally taxable pay.

Check how each piece of your program is taxed with a tax advisor before launch.

What to offer: a practical checklist

1. Start with your health plan. Make sure employees have real coverage first. See group health insurance and ICHRA.
2. Ask employees what gets in their way: cost, time, finding a clinician, or wait times. Fund the barriers they name.
3. Favor access over activity tracking. The trials above found little benefit from screening and coaching programs in the short run. Lowering the cost of visits, labs and mental health care is a more direct way to help people get care.
4. Avoid penalties tied to health results. They add legal rules and can feel punitive to the employees who most need help.
5. Measure use, not sign-ups. Track how many employees actually used a benefit and what they say about it.
6. Explain it simply at hiring and open enrollment, and repeat it.

Employers with 25 or more employees can add Gabriel for Teams, a care membership, alongside their health plan. It is a membership, not group health insurance and not an HRA or ICHRA.