Frequently Asked Questions

Please reach us at info@ficabenefitwellnesssolutions.com if you cannot find an answer to your question.

If this is so good, why isn't every employer doing it?

The structure is not new — it relies on IRS code sections (105, 106, 125, 213(d)) that have been on the books for decades — but purpose-built wellness plans bundling Section 125 pre-tax mechanics with a post-tax wellness reward are a more recent product category.
Most benefits brokers don't carry these plans because they sit between traditional wellness programs and major medical — they aren't in either of the standard channels brokers and PEOs typically sell.
The plan requires specific compliance documentation (Section 125 plan document, SPD, non-discrimination testing, formal legal & tax opinions) that not every benefits administrator can deliver. LaaSy + ACA Solutions package that infrastructure as part of the plan.
Adoption is growing rapidly in middle-market employers (50–5,000 employees) where the FICA savings are big enough to matter but the administrative burden of full custom plan design isn't worth it.
The plan looks like it's too good to be true precisely because most employers compare it to plans they already know (wellness program, HSA, ICHRA). It's a separate category — payroll-tax engineering with a real care delivery layer on top.

What happens if the IRS audits this and reclassifies the wellness reward as taxable income? Am I on the hook for back taxes and penalties?

Three layers of independent protection are built into every agreement:
Legal opinion from Hitesman Law, P.A. (national ERISA firm) confirming compliance under Sections 105, 106, 125, and 213(d) — includes legal defense coverage up to $500K per employer + $10K per employee.
CPA tax opinion from CBIZ Advisors, LLC (top-10 national CPA firm) — formal 7-page review of Section 125 plan compliance with IRS, ERISA, ACA & COBRA requirements
Tax indemnity from KCP Tax & Advisory — covers back taxes and penalties on any adverse audit finding for FICA exclusions, Section 105(b) treatment, and payroll compliance.
Audit track record: Zero audits or adverse findings to date across the LaaSy plan portfolio.
The indemnity is part of the standard agreement — it's not an add-on or extra fee.

Pre-tax deductions reduce my employees' Social Security wage base. Aren't we cutting their future SSA benefits to fund their take-home today?

The same trade-off exists for every pre-tax benefit (traditional 401(k) match, HSA, FSA, transit benefits, even employer-sponsored health insurance). It's a recognized feature of the Section 125 cafeteria plan structure — not unique to wellness.
Yes — the pre-tax wellness premium reduces the employee's Social Security wage base by the amount of the premium (~$1,200/month in our typical example, or $14,400/year).
For a worker earning the median wage (~$52K/yr), the marginal impact on SSA retirement benefits at age 67 is in the range of $15–$30/month — modest relative to the $70–$120/month take-home increase the employee captures today.
Workers earning above the Social Security wage base cap are not affected at all — their SSA benefit is already maxed out.

What happens if my employees don't engage? Do FICA savings only flow when they engage in the plan?

Two separate mechanics, two different sensitivities:
FICA savings are driven by the pre-tax wellness premium — they accrue as soon as the premium is deducted from the paycheck, regardless of whether the employee engages in the plan. So, FICA savings are a function of enrollment count, not month-to-month engagement
The wellness reward requires engagement (use of the healthcare benefits, health risk assessment, wellness coaching, etc.). If an employee does not proactively engage in the plan in a given month, we will hard ship them wellness content to their home and track the deliverability. This meets the required monthly engagement so the employee is still receiving their reward and the employer's FICA savings on their pre-tax premium still occur.
Typical engagement runs 85–95% across LaaSy clients — the bar for engagement is low (~5 min/month) and is built into the plan delivery rather than relying on employer follow-up.

What about employees who opt out?

FICA savings on opted-out employees are forgone. Negative-enrollment with a 30-day opt-out window keeps the participation rate high — typically 97%+ of eligible employees stay enrolled.

What does my HR/payroll team actually have to do every month? I don't have headcount to take on a new operational burden.

One-time launch effort (≈4-6 hours total of internal time):
Provide a basic payroll census (name, gross pay, state) — one-time data extract.
Sign two agreements (ACA Solutions + KCP Tax). Standard terms.
Add two payroll codes (ACA 125 pre-tax + ACA RWD post-tax) — LaaSy walks payroll through it.
Send the LaaSy-drafted announcement to the team. Run a 30-day opt-out window.
Ongoing monthly effort (≈15 min/month):
Submit a short monthly payroll report so LaaSy can confirm enrollment + reward accuracy.
Everything else — employee comms, enrollment, opt-outs, customer support, compliance documentation, etc. — is handled by LaaSy Health and ACA Solutions as plan administrator.

How does this interact with our ACA reporting obligations? Are we still on the hook for Penalty A or B?

For employees who already have employer-sponsored major medical, the wellness plan stacks on top — no change to their existing 1095-C status.
For employees who are overwise uninsured, LaaSy will enroll that employee in a Minimum Essential Coverage (MEC) plan at ZERO cost to the employee or employer. The MEC plan covers all ACA-required preventive services per USPSTF/CDC/HRSA guidelines.
Penalty A: MEC satisfies the employer-shared-responsibility "offer of coverage" requirement, so the employer is protected from the Penalty A (no offer) exposure.
Penalty B: Penalty B (affordability + minimum value) applies to your major medical offering, not to the MEC. The LaaSy plan doesn't change your Penalty B exposure either way.
1095-C reporting: Employees offered MEC through this plan are reported as having received an offer of coverage. Your payroll vendor or ACA reporting partner does the actual filings.

We already have major medical, an HSA, and a 401(k) match. Will this disrupt any of that?

Stacks with major medical: The wellness plan sits on top of your existing major medical. No coordination of benefits required. Your medical carrier doesn't even need to know about it.
Stacks with HSA: If you offer an HSA, the wellness plan does not provide "medical coverage" in the sense that disqualifies HSA eligibility.
Stacks with ICHRA: Works alongside ICHRA arrangements. ICHRA satisfies the offer of coverage; the wellness plan adds the take-home pay increase + benefits layer.
401(k) match impact: Depends on your 401(k) plan document. If your match is calculated on gross wages or employee contribution, it's unaffected. If it's calculated on "compensation after Section 125 deductions," the match will be marginally reduced. Most plan documents use gross — but this is worth checking.

If this doesn't work out, how do we exit? What are the costs and the contractual lock-in?

Standard agreement terms:
Plan year typically runs 12 months, with evergreen annual renewals, but we can align to calendar or plan year if preferred.
We allow no cause termination at any point with 60 days written notice.
No "clawback" of FICA savings already realized — they're booked when the payroll runs. Exit doesn't retroactively un-do them.
If the IRS or DOL retroactively challenges the plan after termination, the indemnity and audit support from KCP remains in effect for three years following termination.

We have employees in multiple states. Do all states recognize the pre-tax treatment, or are some employees going to get a tax bill from their state?

Most states conform to the federal Section 125 pre-tax treatment. Pre-tax wellness premium reduces state taxable wages in the same way it reduces federal taxable wages.
States with conformity quirks to flag:
Pennsylvania: PA does NOT recognize Section 125 pre-tax for state income tax purposes (state-only exception). PA employees still get the federal FICA + federal income tax benefit but pay state income tax on the full gross.
New Jersey: NJ generally conforms but applies state-specific rules to certain reimbursements. Wellness reward treatment may differ.
California: Generally conforms with federal Section 125 treatment for state income tax purposes.
FICA savings (Social Security + Medicare) are federal — not state-dependent. The employer's FICA savings on the pre-tax premium are not affected by state conformity.
For multi-state employers: LaaSy Health models state-specific impact during the payroll savings analysis based on state of filing, so each employee's projected paycheck preview reflects their actual state.

Has LaaSy structured a referral or sponsorship relationship with a 501(c)(3) before? If so, how was the compensation structured to address unrelated business income tax exposure for the nonprofit?

We have not done this with a 501c3 before. We would simply have you complete a W9 and provide ACH information on where you would like us to issue commission payments.

How does LaaSy ensure employees actually perform the required year-end substantiation of unreimbursed medical expenses, and what happens administratively when an employee doesn't?

We monitor this on a monthly, quarterly and annual basis.
We track all benefit usage at the CPT code level to track at the EE level all paid and incurred costs. If a given EE has not generated enough to cover or exceed the amount of the wellness reimbursements within a month, we proactively ship and track delivery of wellness content in a hard copy.
We make all wellness sessions available to all EEs, but are unable to track actual attendance of those sessions due to HIPAA requirements. With the CPT code tracking and proactive interverion, our plan is specifically designed to ensure there is no tax liability on any of the wellness rewards across a month, quarter or year, so none of the wellness rewards are considered taxable income.

Has LaaSy or ACA Solutions Hub obtained any opinion that specifically addresses IRS CCA 202323006 as applied to LaaSy's actual claims administration and CPT- code activity structure — not just the generic ACA Solutions Preventive Care Program template?

I am unclear on the distinction of the question being asked here and what the “generic ACA Solutions Preventative Care Program template” is, but the answer is this has been reviewed, vetted and deemed compliant following the issuance of the aforementioned memorandum that was written in early 2023 by both CBIZ as well as KCP, which notably is run by former IRS auditors. If it would be helpful to schedule a call to discuss with KCP, I am happy to set this up.

What is the program's actual audit history? Has any adopting employer been audited by the IRS or Department of Labor, and what was the outcome?

None of our clients have been audited to date.

Is the $500,000 legal defense and tax indemnity insured or bonded by a third party, or is it a direct corporate promise from Hitesman Law, CBIZ, or KCP? What happens if multiple employers are audited in the same period?

Legal: Yes, it’s a fully bonded plan via a third party. The policy is written on a per employer basis when the service agreement is signed, so every employer we onboard and contract with is accounted for in the total liability pool. As such, if there are multiple needs to draw on this simultaneously, each employee will have full coverage.
Tax: This is also fully bonded via third parties. For the tax liability, this is covered under an E&O policy that is scaled for each employer that is onboarded/contracted, so same principles as above with scaled coverage based on current client count/size.

For employers over 100 participants, who is responsible for Form 5500 preparation and filing, and does LaaSy administer full nondiscrimination testing, or is that the employer's unmonitored obligation?

administer COBRA for $1 PEPM with a minimum of $50/month
file 5500 for $500/year

If an employee never logs their medical expenses at year-end, does LaaSy issue a corrected W-2 automatically, or does that liability sit undetected with the employer until an audit surfaces it?

Please see answer to W2 – the plan design is such, that we proactively intervene on a monthly basis to ensure no tax liability for the employee at the end of the year, so no need for corrected W2.

What is LaaSy's position if the IRS issues further guidance narrowing CCA 202323006, and what recourse do adopting employers have if the favorable tax treatment is revoked retroactively?

Part of our partnership with KCP and the former IRS auditors who run the company is not only the audit protection/support and liability coverage, but also the ongoing monitoring of proposed rules that would impact the compliance of our plan design. If there is a proposed rule issues that would have an impact on the compliance of our plan design, they work directly with ACA to adapt plan design so should the proposed rule ever become law, we are always in compliance.
If the tax treatment is retroactively revoked and there is a liability for the employer or employee, that is covered by KCP as part of the E&O policy so long as the employer was upholding their requirements as outlined in the services agreement. KCP also maintains a 3 year tail on all coverage so this is appliable even if the employer is no longer participating in the plan and within a 3 year window.

Competition? – Our Wellness Life

What compliance reviews and associated protections to they have in place for employers and employees?
What is the plan structure that ensures at the end of the year there is not a tax liability for the employee or employer on the wellness rewards to alleviate any potential correction of W2s and surprise taxable income for the employee?.

Frequently Asked Questions

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