Business Tax Strategy · ProfitGuard Plus
Why are activity based
wellness plans not compliant?
Because a payment for doing an activity is not a reimbursement for medical care. Section 213(d) defines medical care, and a reward for logging a workout, booking a call, or ordering from a pharmacy service does not fit it. The IRS Office of Chief Counsel addressed this kind of design directly.
Quick answer
- An activity based plan requires an employee to do something each month to keep the benefit, and pays them for doing it.
- A payment for doing an activity is not a reimbursement for medical care under Section 213(d), so the tax treatment does not follow.
- IRS Office of Chief Counsel Memorandum 201703013, dated January 20, 2017, addressed this kind of arrangement.
- There is a practical cost too. Somebody at your company has to track those activities every month and prove it later.
- ProfitGuard Plus is participatory, not activity based. The benefit is the care itself, and nobody has to do a monthly task to keep it.
- The IRS has never ruled that all wellness plans are non compliant. It addressed specific designs.
What activity based means
The plan pays the employee a benefit for completing an activity: a monthly telehealth visit, a wellness log, an order through a pharmacy service. The money is tied to the doing, not to medical care that was received. That is the design the memoranda were written about.
What the IRS said
Memorandum 201703013 says the value of coverage by a wellness program that provides medical care under Section 213(d) is generally excluded from income under Section 106(a). A reward for an activity is not medical care, so it does not get that treatment. The memorandum did not say wellness plans are illegal. It said this design does not work.
How ProfitGuard Plus is different
It is participatory. Employees receive preventive care through the program: telehealth, mental health support, care navigation, chronic condition support. The reimbursement is for that care, under the SIMRP plan document. Nobody has to do a monthly task to keep it, and nobody has to track one. The full checklist for judging any plan is on the plan compliance page.
Frequently asked questions
What is an activity based wellness plan?
A plan that pays employees a benefit for completing an activity each month, such as booking a telehealth visit or logging a workout. The payment is tied to the activity, not to medical care received.
Did the IRS ban wellness plans?
No. The IRS has never ruled that all wellness plans are non compliant. Its Chief Counsel memoranda addressed specific activity based designs used as a tax loophole.
Can a plan require a monthly activity to keep the benefit?
Not if the tax treatment depends on it. A benefit paid for doing an activity is not a reimbursement for medical care under Section 213(d). Ask your provider to show you in writing why their design is allowed.
How do I know if my plan is activity based?
Ask one question: does an employee have to do anything each month to keep this benefit? If the answer is yes, it is activity based.
What does participatory mean?
The benefit is the care itself, available to everyone who participates, with no monthly task attached. That is how ProfitGuard Plus is built.
This is education, not tax or legal advice. Actual savings vary by payroll structure, participation, and state and local tax. Talk to your CPA about your specifics before you decide. ProfitGuard Plus is a marketing name for a structure built on IRS code sections 125, 106(a), 105, and 213(d).
See your ProfitGuard Plus number
Enter your W-2 headcount and see the combined value first. Then we'll run your exact numbers. You can also read the full walkthrough on the ProfitGuard Plus page or call +1 (586) 899-1003.
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