The IRS has issued Fact Sheet 2024-13 (the “Fact Sheet”) to confirm that work-life referral (“WLR”) services provided by an employer are non-taxable, de minimis fringe benefits.
Background. A WLR program is an employer-funded fringe benefit that provides work-life referral services to eligible employees. These services are restricted to informational and referral consultations that assist employees with identifying, contacting and negotiating with life-management resources for solutions to a personal, work, or family challenge. Examples include choosing a suitable child or dependent care program, connecting with a local retirement or financial planner, or navigating eligibility for government benefits. WLR programs are often incorporated into an employee assistance program, or may otherwise be bundled with other types of services or programs offered by an employer.
Law. Section 61 of the Internal Revenue Code (the “Code”) provides that gross income includes all income from whatever source derived, including compensation for services, fees, commissions, fringe benefits, and similar items. A fringe benefit provided by an employer to an employee is presumed to be income for the employee unless it is specifically excluded from gross income by another section of the Code. Section 132(a)(4) of the Code provides that gross income does not include any fringe benefit that qualifies as a de minimis fringe benefit. Section 132(e) defines a de minimis fringe benefit as any property or service the value of which is (after taking into account the frequency with which the fringe is provided) so small as to make accounting for it unreasonable or administratively impracticable.
Fact Sheet. As explained in the Fact Sheet, WLR services include assistance with completing paperwork and basic administrative tasks that help direct the employee to appropriate providers of the necessary underlying life-management resources. WLR programs work with subject-matter specialists who are trained in helping employees navigate through work-life challenges. More specifically, WLR services offer employees guidance, support, information, and referrals in connection with, for example:
- identifying appropriate education, care, and medical service providers,
- choosing a child or dependent care program,
- navigating eligibility for government benefits, including Veterans Administration benefits,
- evaluating and using paid leave programs offered through employer or a state or locality,
- locating home services professionals who specialize in adapting a home for a family member with special care needs,
- navigating the medical system, including private insurance and public programs, and utilizing available medical travel benefits, and
- connecting the employee with local retirement and financial planning professionals.
WLR programs may be available to a significant portion of an employer’s employees, but they are used infrequently by employees and only when an employee faces one of the particular challenges the programs are designed to address.
Therefore, the Fact Sheet concludes that, under these circumstances, WLR programs are exempt from taxation under Section 132(e). However, the Fact Sheet also notes that the information contained therein might not apply to every situation and is subject to change.
Fact Sheet 2024-13 is available at: https://www.irs.gov/newsroom/frequently-asked-questions-about-work-life-referral-services.