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The wonderful world of wellness spending accounts
Once upon a time, employee benefits were rigid and static. Plans didn’t offer much in terms of flexibility or options. This kept some benefit plans out of reach for many small to medium-sized businesses that couldn’t justify the cost of extras beyond health and dental benefits. As a result, businesses lost out on recruiting and retaining top talent because potential employees were looking for great benefit plans as part of their total compensation package. Luckily, those days are long gone and now there are a variety of affordable benefit and spending account options available. Wellness spending accounts are one such option that are very popular for both businesses and their employees.
A wellness spending account is funded by employers and allows employees to spend their allocation on costs such as personal development, fitness memberships or equipment, or wellness services. Wellness spending accounts are tax-deductible for employers but approved expenses are considered taxable and are added to an employee’s yearly taxable income. Any unused funds are not added to their taxable income.
Benefits for Employers
A wellness spending account offers employers several benefits. The funds allocated to these accounts are tax deductible. Employers can create a plan that works for their budget and their employees. The employer determines the annual allowance for their employees as well as the eligible expenses. This means employers know the maximum amount that could be paid out in any year, making it easier to budget for these costs. Plans can be designed so that unused credits cannot be rolled over into future years, meaning cost-control measures are in place at all times. The ability to customize eligible expenses gives employers the opportunity to talk to their employees and provide options based on their stated needs and wants. This can be a powerful tool in retaining talent!
Working with us to develop and implement a wellness spending account means there are no headaches or hassles when it comes to administering the plan. The claims and reimbursement process can be done digitally. You will receive confirmation on spending amounts so that it can be added to the employee’s taxable income.
Benefits for Employees
An employer-provided wellness spending account is a fun benefit to have and use. Eligible expenses can fall under several broader categories such as
- Fitness services and equipment;
- Personal development and hobbies;
- Financial advice;
- Insurance premiums for products like Critical Illness, Individual Life, or Disability insurance;
- Mental health services; and
- Health support.
Employees pay for expenses out of pocket and submit receipts for reimbursement. This type of account offers true customization and individual support by giving employees the ability to claim expenses for activities and services that meet their unique needs. This not only helps employees take control of their health, but also creates a culture where they feel supported and, in turn, become more engaged and productive in the workplace.
Many employers are eager to offer wellness spending accounts but feel overwhelmed by the responsibility of choosing what expenses should be eligible. The good news is that employers don’t need to shoulder that burden on their own. We can help you determine annual amounts as well as eligible expenses, and set it up so that administration of the plan is a breeze! Contact us
for a free no-obligation consultation about wellness spending accounts.
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