Wellness reimbursement program: what it is, why to implement & examples

A wellness reimbursement program is an employee benefits solution that enables companies to financially support their workforce's health and wellness initiatives. These programs, also known as wellness stipends, allow employees to receive reimbursement for a diverse range of wellness expenses, from gym memberships and fitness classes to mental health apps and ergonomic equipment. 

As organizations increasingly recognize the value of employee wellness reimbursement programs, they're discovering how these benefits can transform workplace culture while delivering measurable returns on investment.

What is a wellness reimbursement program?

A wellness reimbursement program is a structured employee benefit that provides financial incentives for employees to engage in health-promoting activities and purchases. 

Unlike traditional healthcare benefits, these programs offer flexibility by covering various wellness expenses that employees choose based on their individual needs and preferences. 

Common wellness reimbursement ideas include fitness equipment, nutrition counseling, stress management courses, wellness coaching sessions, and wearable fitness technology.

By incentivizing healthy behaviors, businesses can improve the health and well-being of their employees while also reducing healthcare costs. A Glassdoor survey found that 94% of employees want benefits that positively impact their overall well-being. Employers who set up a program like this show that they care for their employees.

Why implement a wellness reimbursement program?

Implementing a wellness reimbursement program can provide many benefits to businesses, including:

• Improved employee overall health and well-being
• Reduced healthcare costs
• Increased employee engagement and productivity
• Improved employee retention and recruitment
• Enhanced corporate image and reputation
  

Allbrids was looking to support their diverse workforce. With employees who worked remotely, hybrid and onsite, they needed a flexible benefits solution to support the modern workforce. A Lifestyle Spending Account administered by Forma solved the problem of low benefits utilization that a wellness reimbursement program can solve.

“We're committed to creating better things in a better way for the Allbirds flock. A great deal of thought goes into every offering we provide, including the way we name our benefits. It is important for us to create a global process that is inclusive and simple so that all eligible employees can best take advantage of these great benefits. As such, we worked with Forma to create wellness, caregiving, connectivity, and work-from-home programs meaningful for Allbirds. We are proud to customize this program to fit our modern retail workforce. Not only did we see more than 72% engagement with 97% CSAT rating in 2021, but we also saved our ops team significant time in the admin process and associated employee inquiries.”

-Kim Lee, Manager, Total Rewards at Allbirds

8 Steps to implementing a wellness reimbursement program

1. Define program objectives

Before implementing a wellness reimbursement program, businesses should define their program objectives. This includes identifying the goals of the program, such as improving employee health and reducing healthcare costs. Businesses should also identify the key performance indicators (KPIs) they will use to measure the success of the program. Additionally, it is important to consider the budget for the program and decide which types of wellness activities will be eligible for reimbursement.

Forma recommends surveying your employees to get a good understanding of what your employees are wanting in a wellness program. The definitive guide to benefits spending account gives great insight into how to do this successfully.

2. Set up an administrative process

Once businesses have established their objectives, they should set up an administrative process to manage the program. This includes setting rules around who is eligible for the program and how reimbursements will be handled. Businesses should also decide whether they will offer reimbursements up front or after the activity is completed, as well as if there are any limitations on the amount of reimbursement available.

Things to keep in mind here are if the reimbursements will be administered via payroll deposit, expense software, a traditional third-party administrator (TPA) or a new generation TPA.

Forma recommends a modern TPA (like Forma) to help offer the most flexible package and help put the power of choice in the hands of their employees. In additional to just reimbursements, employees have the option of spending in the Forma store or using the Forma card. This way, the employee doesn’t need to wait for reimbursement.  

3. Set program limits

To ensure the program is sustainable, businesses should set program limits and determine the flexible benefits funding strategy. This can include the maximum reimbursement amount per employee, the maximum number of reimbursements per year, or a cap on the total program budget.

Budget doesn’t have to be a barrier to creating a wellness reimbursement program. Many companies reallocate funding, shift funds dedicated to real estate, tap into healthcare and wellness funds or start small and iterate.

4. Identify eligible expenses

Once businesses have defined their program objectives, they should identify the eligible expenses that will be covered by the program. Eligible expenses can vary depending on the business and its employees, but can include gym memberships, fitness classes, wellness coaching, and even massage therapy. The program design can be up to the discretion of the employer. For a list of common wellness reimbursement expenses, see Forma’s Lifestyle Spending Account benchmark report.

5. Determine employee eligibility

Businesses should also determine which employees are eligible for the program. This can include all employees, specific departments, or those who meet certain criteria, such as part-time or full-time status. Businesses should also consider any limitations on eligibility, such as employees who have been with the company for a certain amount of time.

Note: it’s important to find a program that serves internationally if you have an international base of employees.

6. Communicate program details to employees

In order for a wellness reimbursement program to be successful, businesses must ensure their employees have all the necessary information. This includes providing detailed descriptions of the types of activities eligible for reimbursement, as well as how to apply and any deadlines associated with the program. Additionally, businesses should communicate how reimbursements will be paid out and how to submit receipts or other required documentation.

7. Implement and track program

Once the program is in place, businesses should implement and track the program to ensure its success. This can include regularly reviewing program data, such as the number of reimbursements and the total program budget, to ensure the program is meeting its objectives.

8. Monitor progress

Once the program is up and running, it’s important to monitor progress. This includes tracking the number of employees enrolled in the program, as well as how much money has been spent on reimbursements. Additionally, businesses should measure their KPIs and make changes or adjustments if necessary.

By following these steps, businesses can successfully implement a wellness reimbursement program that provides clear benefits for employees.

5 examples of wellness reimbursement programs

Companies across industries are implementing innovative wellness reimbursement programs to support their employees' diverse health and wellness needs. 

These employee wellness reimbursement initiatives demonstrate how organizations can create flexible benefits that truly resonate with their workforce while promoting a culture of well-being.

1. Allbirds' comprehensive wellness stipend 

Allbirds created a globally inclusive wellness reimbursement program that serves their diverse workforce of remote, hybrid, and onsite employees. Their wellness stipend covers multiple categories including wellness activities, caregiving support, connectivity, and work-from-home expenses. 

This flexible approach resulted in over 72% employee engagement with a 97% satisfaction rating, proving that comprehensive wellness reimbursement ideas can drive both participation and employee satisfaction while reducing administrative burden.

2. Tech company fitness-focused program 

Many technology companies offer wellness reimbursement programs that prioritize physical fitness and mental health. These programs typically provide annual stipends ranging from $500 to $1,500 per employee for wellness expenses like gym memberships, personal training sessions, yoga classes, meditation apps, ergonomic office equipment, and mental health counseling. 

The flexibility allows employees to choose wellness activities that align with their personal health goals and lifestyle preferences.

3. Financial services holistic wellness approach 

Several financial services firms have implemented wellness stipends that take a holistic approach to employee health. These programs reimburse for traditional fitness activities while also covering stress management workshops, nutrition counseling, sleep improvement programs, and preventive health screenings. 

By addressing multiple dimensions of wellness, these companies see improved employee engagement and reduced healthcare costs.

4. Manufacturing industry safety-plus-wellness model 

Manufacturing companies often combine workplace safety initiatives with broader wellness reimbursement programs. These employee wellness reimbursement plans cover safety equipment, ergonomic assessments, physical therapy, and workplace injury prevention programs alongside traditional wellness expenses. 

This approach helps reduce workers' compensation claims while promoting overall employee health and safety.

5. Startup flexible lifestyle spending accounts 

Many startups and growing companies implement wellness reimbursement programs through lifestyle spending accounts that give employees maximum flexibility. These programs typically offer monthly or annual wellness stipends that employees can use for any qualifying wellness expense, from fitness equipment and healthy meal delivery services to mental health apps and spa treatments. 

The broad category definitions and easy reimbursement processes make these programs particularly popular among younger workforces who value choice and convenience in their benefits packages.

Is a wellness stipend taxable?

The tax treatment of wellness stipends largely depends on how the program is structured, but in most cases, wellness reimbursement programs are considered taxable income to employees. 

When employers provide wellness stipends for expenses like gym memberships, fitness classes, wellness coaching, or meditation apps, these benefits are typically treated as taxable fringe benefits that must be reported on the employee's W-2 form and are subject to federal, state, and payroll taxes. 

Employers must withhold appropriate taxes on these reimbursements, and employees should expect these wellness expenses to be included in their taxable income, which may impact their overall tax liability.

However, certain wellness expenses may qualify for tax-free treatment if they meet specific IRS criteria for medical expenses or are structured under Section 105 medical reimbursement plans. These exceptions generally apply to preventive care services prescribed by healthcare providers, medical equipment recommended for specific health conditions, mental health counseling, smoking cessation programs, or weight loss programs prescribed to treat medical conditions.

For most traditional employee wellness reimbursement programs that cover general fitness and wellness activities, both employers and employees should consult with tax professionals to ensure proper compliance and understand the specific implications of their wellness stipend program based on current tax regulations.

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Final thoughts

Implementing a wellness reimbursement program can provide many benefits to businesses and their employees. By defining program objectives, identifying eligible expenses, determining employee eligibility, setting program limits, creating a communication plan, and implementing and tracking the program, businesses can create a successful program that improves employee health and well-being.

For more information about Lifestyle Spending Accounts and discuss these eligible expenses, <span class="text-style-link text-color-blue" fs-mirrorclick-element="trigger" role="button">schedule a consultation</span> with one of our experts. We’d be happy to help you find the perfect Lifestyle Spending Account solution for your unique needs.

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