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Employer Provided Work-Life Referral Programs Considered Nontaxable Fringe Benefit


In recent guidance published by the Internal Revenue Service (IRS) on April 16, 2024, the IRS has taken the position that work-life referral plans provided by employers are excludable from employee compensation and not subject to payroll taxes. In FAQs published in Fact Sheet FS-2024-13, IR 2024-110, the IRS indicated that work-life referral (WLR) services will be considered de minimis fringe benefits because such services are used infrequently by employees and only when an employee faces one of the specific challenges the program is designed to address.

WLR services are employer-funded benefits that provide employees with access to confidential third-party informational and referral consultations to assist with identifying, contacting, and negotiating with life-management resources for solutions to a personal, work, or family challenge. WLR services may also include assistance with completing paperwork and basic administrative tasks. A WLR plan is often integrated into an employee assistance plan (EAP) or bundled with other employer services; however, the IRS guidance only addresses the WLR services and not EAPs or any bundled resources.

An EAP is an employer-provided voluntary program that allows employees to access resources and tools, including confidential counseling, health coaches, and legal and financial services. Because EAPs commonly provide treatment for drug and alcohol abuse and other similar health and medical problems, they often qualify as employee welfare benefit plans subject to ERISA. Some benefits under employee wellness plans may be taxable under Section 105(a) of the Internal Revenue Code. If an EAP merely provides referrals and does not pay for any services or benefits, the EAP will not be deemed to be an employee welfare benefit plan (see Pension Welfare Benefits Administration Opinion Letter 91-26A).

Common WLR concierge services include referrals for a wide range of issues, including help navigating resources for:

  • addressing debt relief or saving for college
  • navigating health care, including private and public insurance
  • identifying home repair professionals
  • evaluating elder care or childcare options
  • determining eligibility for government benefits
  • obtaining legal guidance
  • navigating paid leave programs, both employer- and government-provided
  • connecting with retirement, estate, and other financial planning resources

Employers typically make such services available to a significant portion of employees and pay third-party providers a monthly fee per eligible employee, rather than a fee based on actual individual usage. As a result of this payment structure, and the fact that such services are used infrequently and for short-term and targeted issues, the IRS has found that WLR services are considered nontaxable de minimis fringe benefits. Section 132(a)(4) of the Internal Revenue Code allows an exclusion from gross income for fringe benefits that constitute “de minimis fringe benefits.” De minimis fringe benefits are generally reserved for benefit amounts that, considering the benefit’s value and the frequency in which it is provided, are so small that accounting for them would be unreasonable or administratively impracticable. However, there is no minimum value provided for making such a determination, and de minimis treatment does not apply to cash or cash equivalent fringe benefits, e.g., gift certificates or credit cards.

The IRS has clarified that use of WLR services will not result in gross income to an employee and that the employer is not required to withhold employment taxes (federal income tax, Social Security and Medicare tax, and federal unemployment tax) for the use of these services. The FAQs have not been published in the Internal Revenue Bulletin and are subject to further modification and existing tax law. However, taxpayers can reasonably and in good faith rely on such FAQS until further guidance is issued.

For more information or if you have any questions about the information in this newsletter, please contact your Quarles & Brady counsel or:

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