HealthWorX Warns Against Risky Tax-Engineered Health Plans

OXNARD, Calif., Sept. 18, 2026 /PRNewswire/, HealthWorX, a nonprofit, third-party administrator (TPA) model, is warning employers about the risks associated with tax-engineered Section 105(b) reimbursement programs. According to HealthWorX, these programs, which convert payroll deductions into purportedly "tax-free" cash payments, are increasingly unsafe and difficult to trust due to repeated IRS challenges.

HealthWorX points out that the Internal Revenue Service (IRS) has issued several memoranda challenging the tax-exempt status of these programs. Chief Counsel Memorandum 201622031 concluded that cash wellness rewards and reimbursements of premiums previously paid through pre-tax salary reductions could not be excluded from employees' gross income. Memorandum 201719025 examined a self-funded arrangement where payments for health-related activities exceeded employees' after-tax contributions and concluded that the amounts were income and wages. Memorandum 202323006 reaffirmed that wellness indemnity payments are taxable when employees have no corresponding unreimbursed medical expenses.

Dr. John Zabasky, Chairman and CEO of WorXsiteHR, the third-party administrator supporting HealthWorX, emphasized the dangers of relying on these programs. "Employers are being asked to rely on tax assumptions that the IRS has addressed repeatedly. Employees are being told that a cash-like payment is a healthcare benefit. Neither proposition creates a dependable foundation for the future."

The nonprofit component of the model advances a mission to reduce financial barriers and expand access, particularly for lower-income and frontline workers. The TPA component supplies enrollment, eligibility administration, participant support, claims-related functions, plan oversight, and documented operational controls.

According to HealthWorX, its model successfully underwent a U.S. Department of Labor audit, reinforcing its commitment to transparent administration and compliance-focused operations. Zabasky added, "The choice is becoming clear. Employers can purchase a temporary tax narrative, or they can invest in durable healthcare infrastructure. The nonprofit, TPA model earns trust because its value comes from care, not from disguising taxable compensation as a medical reimbursement."

HealthWorX's model is designed to expand access to healthcare and remove financial barriers, particularly for lower-income and frontline workers. The nonprofit component advances a mission to reduce financial barriers and expand access, while the TPA component ensures efficient and transparent administration of healthcare plans.