Feedback on health promotion program (OpHealth)? Tax reduction.

[SweetTPi]

My work is offering a new benefit for 2019 through OpHealth, that I can't seem to figure out how I feel about.  If anyone has experience, I'd love to hear about it.  I'll be meeting with a representative next week, so questions are also welcome.

The program:

I would pay a premium of my own choice between $500 and $2000 per month.  This is (supposedly) pre-tax and pre-FICA money.  If I do monthly online assessments, I'll receive a benefit payment of 85% of the premium, (supposedly) post-tax.  For example, every month I would have $1000 taken out pre-tax and then receive $850 post-tax, a 15% rate.

The savings come from the pre- to post- tax conversion.  I'm in the 22% tax bracket, and FICA adds another 7.65%. If I pay tax on the $1000 I would have an in-pocket after-tax value of $703.50, as opposed to $850 through the program.  Even when I fall down into the 12% bracket, taxes would be 19.65% vs the 15% of the wellness program.

As a downside, I have to make sure to jump through the assessment hoops every month for it to work out in my favor.  If I don't, you lose the monthly benefit $$ and then are simply out the premium.

Currently I have the following questions for the rep to answer/prove:
- Are the premiums legally excluded from both federal income and FICA taxes? (Section 125 plan, I think?)
- Are the payout benefits fully excluded from all federal taxes?
- Do I have to buy anything (eg a gym membership) to get the benefit?
- Can you show me what the online assessment will be?

Have you ever been a part of a plan like this?  Is there any reason you can think of that I should not do this program?  Any other questions I should grill the rep on?

[Morning Glory]

This sounds shady AF, and probably not even legal. Even if it were legal, I would prefer to pay the taxes that go for roads and schools than give 15% of my money to some company.

[SweetTPi]

This sounds shady AF

I know, right?  There is more to the plan than I described that I'm sure helps on the legality side, though.  Part of it is more like a regular hospital indemnity plan, where for certain events there's a flat payout.  For example, an ER visit has a benefit of 1x the premium, an ambulance ride has a benefit if 2x, etc.  A source I found tonight says that some indemnity plans have preventative care benefits, which maybe is what this falls under?  (Source)

Any which way, it seems like a shady tax dodge and I have no idea what the assessments could be.  Am I going to have to report how many drinks I've had every month?  How much I've eaten?  Put in how many minutes of exercise and then be told it's not enough for the program?

[katsiki]

Hmmm... never heard of anything like this but not sure it is shady/illegal.

Could it be this?  http://ophealthbenefits.com/for-employers/

[SweetTPi]

Looks like the right people, katsiki.  I'd never heard of anything like it before, either.

I'm worried about it being sold as the given tax-exempt situation, and then the IRS doing an investigation, deciding that it's not, and demanding taxes and penalties.  As well as what hoops need to be jumped through to get the benefit payout.

[katsiki]

Do you work for a larger company?  If so, I wouldn't worry much.  It was probably vetted properly.  If not, I would probably skip / worry about it.

Good luck!