Can Employers Claim the ERTC for Employee Wellness Programs? 

December 27, 2023
Dayes Law Firm

As a business owner who cares about your employees’ health and overall well-being, you may have invested in various employee wellness programs. Whether it’s a physical wellness program, a mental health or stress management program, a nutrition program, or something else, you might now be wondering if these funds can be funded with tax credits according to the latest ERTC guidelines. 

Here, we’ve gone over some ways your business can claim health insurance expenditures, qualified health plan expenses, and other funds allocated for employee wellness as an Employee Retention Tax Credit refund. 

About the ERTC 

As a reminder, the ERTC was passed as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The ERTC is a refundable tax credit that provided an incentive for small business owners to keep their employees working, or at least on the payroll. 

Eligible employers can claim up to $26,000 in funds per employee, creating a valuable financial lifeline for many small businesses that were and currently are struggling as a result of the pandemic. It’s important to note that the ERTC is a percentage of qualified wages, and the actual credit that can be claimed is based on a long list of specific eligibility criteria. 

You may also see the ERTC referred to as “ERC,” or Employee Retention Credit. The two terms are synonymous. 

Claiming the ERTC and Other Tax Credits for Employee Wellness Programs 

The IRS has changed the rules for ERTC eligibility several times since the introduction of the credit, so it’s normal to be confused about some of the semantics. Further, there have been multiple COVID-related tax relief programs that have been introduced, and some of them overlap. 

The short answer to the question about claiming the ERTC for employee wellness programs is that you can claim “qualified health plan expenses.” Qualified health plan expenses include: 

  • Employer contributions to FSAs (flexible spending accounts)
  • Employer contributions to HRAs (health reimbursement arrangements) 

Further, expenses related to employee wellness programs, such as providing health screenings, vaccinations, mental health resources, etc. may also qualify for ERTC funds. 

These expenses can be paid for basic medical coverage as well as dental and vision coverage. However, there are two expenses that cannot be claimed under the ERTC: 

  1. Small employer health reimbursement arrangements (QSEHRAs)
  2. Employer contributions to HSAs (health savings accounts) 

Changes to ERTC Rules and Health Plan Expenses 

As mentioned above, the rules regarding ERTC-eligible funds have changed over the years. Most notably, businesses that had more than 100 employees could not claim the credit. However, these rules have changed, and the IRS has changed its position on this matter. 

Today, even larger businesses can claim ERTC eligibility for group health plan expenses in some situations. Specifically, if a larger business retained an employee on unpaid leave or furlough, the expenses could be claimed. On the other hand, if the employee was still working and receiving wages, the expenses cannot be claimed under the credit. 

There are nuances to these rules, and the calculation can get complicated for employees receiving partial wages. It is advisable to speak to an experienced tax professional or attorney for guidance in this area. 

Questions about ERTC Employee Wellness Rules? Contact Dayes Law Firm for Guidance 

In addition to the ERTC, businesses can also file for financial relief from other programs like the PPP (Paycheck Protection Program) and FFCRA (Families First Coronavirus Response Act). Each of these programs provides tax benefits for eligible businesses, including reimbursements for wages. Because health insurance is considered a form of wages, these expenses may also be claimed under the ERTC.For up-to-date information about ERTC funds and how the current rules may affect your eligibility, give us a call at (800) 503-2000 or fill out our online form to schedule your free consultation.