On April 16, 2024, the IRS issued fact sheet FS-2024-13 providing answers to frequently asked questions  about the tax treatment of work-life referral services provided to employees under an employer’s work-life referral program. The FAQs clarify that, under certain circumstances, the value received from work-life referral services provided to employees through a work-life referral program can be excluded from federal income and employment taxes as a “de minimis fringe” benefit.

A work-life referral program is an employer-funded fringe benefit that provides referral services to eligible employees, with such services being 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.” For example, work-life referral services include assisting employees with answering questions about finding child or elder care, obtaining legal guidance, or eligibility for government benefits. Work-life referral services also include assisting employees with completing paperwork and basic administrative tasks that help direct the employee to appropriate providers of the underlying life-management resources.

Work-life referral programs are often incorporated into an employer’s employee assistance program (“EAP”) or may otherwise be bundled with other types of services or programs offered by the employer.  These programs may be available to a majority of an employer’s employee population, but in practice, the programs are used infrequently, on a short-term basis, and only when an employee faces one of the particular challenges the program is designed to address.

Takeaways

By definition, a work-life referral program is an employer-funded fringe benefit offered to employees, and so the value received (if any) from such program by an employee qualifies as gross income, unless excludable under a specific provision of the Code.

Fact sheet FS-2024-13 clarifies that the value received from work-life referral services can be excluded from an employee’s gross income for employment tax purposes, but it is important to note that the conclusion reached in the fact sheet applies only to the limited informational and administrative work-life referral services provided to an employee. In other words, the IRS has not indicated that the actual life-management resources or other services that the employee is referred to and then may receive through an employer EAP or through another employer program qualify as de minimis fringe benefits.  Accordingly, employers should carefully consider whether services provided to employees beyond referral services through their EAP or other programs qualify as de minimis fringe benefits or might otherwise qualify for exclusion under another provision of the Code, such as those for health benefits. 

Photo of Montené Speight Montené Speight

Montené Speight is an associate in the firm’s New York office and is a member of the Corporate Practice Group. She advises clients in public and private transactions and other general corporate matters. She spends a significant amount of her practice advising clients…

Montené Speight is an associate in the firm’s New York office and is a member of the Corporate Practice Group. She advises clients in public and private transactions and other general corporate matters. She spends a significant amount of her practice advising clients on all aspects of employee benefits and executive compensation including in connection with employment, separation, and change-in-control agreements. Montené counsels clients on compliance with ERISA, the Internal Revenue Code, and agency regulations. She has experience drafting and advising on tax-qualified retirement plans, health and welfare plans, and cash and equity incentive compensation plans.

Photo of S. Michael Chittenden S. Michael Chittenden

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden…

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden advises companies on their obligations under FATCA and assists in the development of comprehensive FATCA and Chapter 3 (nonresident alien reporting and withholding) compliance programs.

Mr. Chittenden advises large employers on their employment tax obligations, including the special FICA and FUTA rules for nonqualified deferred compensation, the successor employer rules, the voluntary correction of employment tax mistakes, and the abatement of late deposit and information reporting penalties. In addition, he has also advised large insurance companies and employers on the Affordable Care Act reporting requirements in Sections 6055 and 6056, and advised clients on the application of section 6050W (Form 1099-K reporting), including its application to third-party payment networks.

Mr. Chittenden counsels clients on mobile workforce issues including state income tax withholding for mobile employees and expatriate and inpatriate taxation and reporting.

Mr. Chittenden is a frequent commentator on information withholding, payroll taxes, and fringe benefits and regularly gives presentations on the compliance burdens for companies.