Health vs. wellness stipends

Written by: Chase Charaba
Originally published on March 2, 2022. Last updated March 30, 2022.

In the midst of the Great Resignation, with employees leaving their jobs in mass numbers, it’s important to offer flexible benefits to keep your employees and attract new talent to your business. One of the best ways to do this is to offer stipends, also known as fringe benefits.

Stipends are a fixed sum of money offered to employees by their employer to help cover health or living expenses. This is often done through reimbursements.

Taxable health and wellness stipends are two of the most popular benefits available. Despite both having to do with your employees’ wellbeing, they cover very different expenses.

In this article, we’ll explore the differences between health and wellness stipends, and describe what expenses are reimbursable for each:

What is a health stipend?

A health stipend reimburses employees for their eligible medical expenses. Employees submit a request for reimbursement and get reimbursed on their paycheck, similar to a health reimbursement arrangement (HRA).

This gives your employees the option to purchase their own individual health insurance, participate in your group health insurance plan, or use the stipend purely for out-of-pocket health expenses.

Unlike an HRA, though, healthcare stipends are counted as taxable income.

It’s important to note that you legally can’t ask employees for proof of insurance or for receipts for employees’ medical expenses—otherwise your stipend would be considered a “group plan,” subjecting it to far more IRS regulations. To avoid this, employees submit their expenses in their requests using an honor system.

What are the benefits of a health stipend?

Because health stipends don’t have to follow as many regulations as health insurance or HRAs, they give employees more freedom to use their allowances on the medical costs they need.

And, since stipends are taxable income, they can also be given to employees who receive premium tax credits without having to waive their credits. This makes stipends an extremely flexible benefits option for businesses.

If your business already offers a group health insurance policy, an integrated or group coverage HRA (GCHRA) is a great option to help employees cover their out-of-pocket expenses. But what if you wanted to help your employees pay their vision or dental insurance premiums? A GCHRA doesn’t allow employers to reimburse employees for insurance premiums.

Offering a health stipend alleviates this issue and allows you to reimburse insurance premiums while offering a group health insurance plan. In this case, stipends can even be offered in addition to the tax-free benefits of a GCHRA to ensure that your employees are receiving the most benefits.

Health stipends are also a great way to show your employees that you care about their health and general wellbeing.

What’s reimbursable under a health stipend?

With fewer regulations than HRAs, employers are free to reimburse a wide range of expenses with a health stipend.

Examples of what might be reimbursable under a health stipend include:

  • Health insurance premiums
  • Vision insurance premiums
  • Dental insurance premiums
  • Prescriptions
  • Medical services, including office visits and co-pays
  • Chiropractic care
  • Out-of-pocket medical expenses, including expenses outlined in IRS Publication 502

Because expense approval is up to the employer, you can define what’s reimbursable and what isn’t.

Now that we’ve covered health stipends, let’s discuss how wellness stipends work.

What is a wellness stipend?

Similar to a health stipend, wellness stipends are taxable benefits paid to employees to help them cover their wellness expenses. These flexible benefits are primarily used for physical and mental wellness needs other than medical expenses (which are covered by health stipends).

Unlike a health stipend, wellness stipends don’t cover insurance premiums or out-of-pocket healthcare costs otherwise reimbursable under IRS Publication 502. Instead, they cover a range of activities and programs that promote healthy living.

Why offer a wellness stipend to employees?

Because wellness stipends cover different expenses than a health stipend, HRA, or health insurance policy, it’s a great additional perk to offer to employees.

It encourages employees to focus on their wellbeing and it helps your company attract new talent who are looking for a job with good benefits.

Offering a wellness stipend is also a great way to improve productivity. After all, an unhealthy workforce is more likely to be absent or unable to focus on their job.

When the U.S. Office of Personnel Management began integrating wellness benefits into federal agencies, they found that wellness benefits lowered employees’ healthcare costs and absenteeism while increasing their productivity.

And, according to MetLife’s U.S. Employee Benefits Trends Study 2021, employee wellbeing is expected to have the greatest impact on workplaces.

Wellness programs are more important than ever for keeping your employees engaged while helping to improve their physical and mental health.

What’s reimbursable under a wellness stipend?

Now, let’s review what expenses employees can reimburse under a wellness stipend. If medical and health expenses aren’t covered under a wellness stipend, what is?

You can reimburse a variety of wellness expenses, including:

  • Mobile apps, such as fitness or meditation programs
  • Gym or studio memberships
  • Exercise/fitness classes
  • Wearable fitness trackers
  • Home exercise equipment

Gym memberships have been a popular perk for years. But, this often meant using an office gym or one near the organization. With a wellness stipend, you give your employees the freedom to choose whichever gym or class works best for them.

Or, your employees could decide to work out at home instead. Your wellness stipend can reimburse them for their home gym expenses, such as weight lifting equipment or a treadmill.

Wellness stipends don’t just cover physical wellness, either. Your employees can use their wellness stipend on meditation apps or nutrition trackers to promote overall wellness.

With a wellness stipend, you’re giving your employees the opportunity to live a healthier lifestyle, which will only come back to help them succeed at work.


While health and wellness stipends both support your employees' general wellbeing, they cover very different eligible expenses. Knowing the differences between the two can help you make the right choice for your business and your employees.

Want to offer a health or wellness stipend to your employees without the hassle of going about it yourself? Thankfully, with PeopleKeep’s personalized benefits solutions, you can. Our WorkPerks benefit administration software allows you to provide health and wellness stipends to your employees in minutes.

Schedule a call with a personalized benefits advisor today to see how employee perks fit your business’s needs.

Originally published on March 2, 2022. Last updated March 30, 2022.


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