On July 8, the House Small Business Subcommittee on Tax, Finance, and Exports held a hearing to examine a bill (H.R. 1818) designed to help businesses aid their employees in maintaining healthy lifestyles. Sponsored by Chair Pat Toomey (R-PA), the Workforce Health Improvement Program Act of 2003 (WHIP) would exclude from an employee’s gross income the value of any on-site or off-site athletic facility membership provided by an employer as a fringe benefit. The bill also would allow employers to deduct the costs of dues paid to such facilities.
Rep. Toomey opened the hearing, saying, “A physically fit population results in a decrease in health care costs, reduced governmental spending, fewer illnesses and improved worker productivity.” He mentioned that 98 percent of health care-related costs are spent on treating diseases or other health conditions, demonstrating a pressing need to concentrate on prevention efforts. “Exercise and weight loss are critical to maintaining a healthy lifestyle. Public health experts unanimously agree that people who maintain active healthy lifestyles dramatically reduce their risk of contracting chronic diseases,” he said.
Under current law, large businesses that are able to provide on-site fitness facilities can deduct that cost as a regular business expense, while their employees benefit from the free fitness centers without being taxed on the value of that benefit. However, many small businesses are unable to afford on-site fitness facilities. Some may offer to pay for health club memberships at off-site facilities, but the value of that benefit is considered taxable income for the employee. Bill supporters contend that WHIP would level the playing field for small and large businesses by encouraging employers of all sizes to offer athletic facility benefits to their employees.
Giving an example of a current inequity, John McCarthy, executive director of the International Health, Racquet and Sportsclub Association (IHRSA), cited House of Representatives employees who received a Gold Gym’s benefits package and later were informed by the Internal Revenue Service that those benefits were considered taxable income because the gyms are off-site. Mr. McCarthy asserted that “this unfair tax treatment represents an unnecessary disincentive to promoting fitness in the workplace, one that was not intended by Congress.” He said that the government should look for new ways to provide incentives to promote exercise, and contended that “passing WHIP would send a strong signal that the Congress is truly committed to developing new ways to promote healthy lifestyles and is serious about combating the health crisis that we are facing in this country today.”
Edwin Foulke, an attorney with Jackson Lewis, LLP, also recognized obesity as a growing national problem. “Many of the costs associated with an unhealthy and overweight working America are absorbed by employers. Those extra pounds have serious ramifications relating to health care costs, productivity, absenteeism, workplace injuries, morale, and potential employee discrimination.” According to the Department of Health and Human Services, societal costs from obesity are as high as $300 billion, and costs to U.S. companies total an estimated $12.7 billion annually. In addition, health care for obese workers costs 36 percent more than for “normal” weight workers, and medication costs 77 percent more. Mr. Foulke asserted that the WHIP Act would “provide employers and employees with a real incentive to get active and more physically fit, creating a healthier bottom line for everyone.”
National Coalition for Promoting Physical Activity Executive Director Karen Silberman also expressed concern about the fact that “obesity is a significant risk factor for developing chronic diseases such as diabetes, asthma, and heart disease.” She emphasized that “when an employer provides for or encourages physical activity among its employees, the benefits can be considerable, including: significant health care costs savings, decrease in absenteeism, competitive advantage in attracting and retaining highly qualified employees, and promoting the business as pro-employee.” Thus, she asserted, the WHIP bill is a step in the right direction for “it provides the flexibility and incentive to both employers and employees to make physical activity part of their daily routine.” She also praised the bill for providing small businesses the same opportunities to improve their employees’ health as those of large corporations.
