IRS scrutiny fuels growth of nonprofit healthcare model

OXNARD, Calif., Sept. 3, 2026, HealthWorX, a nonprofit third-party administrator, has seen significant growth as the Internal Revenue Service (IRS) continues to scrutinize tax-engineered 105b reimbursement programs. The company claims its model, which combines a mission-driven nonprofit with a professional third-party administrator, is the future of employer-sponsored healthcare.

Unlike traditional programs that focus on returning payroll deductions to employees as purportedly tax-free cash, HealthWorX is dedicated to delivering and managing meaningful healthcare services. The nonprofit, third-party administrator (TPA) model works by having a mission-driven nonprofit organization support access to healthcare, while an experienced TPA manages enrollment, eligibility, plan operations, participant support, provider access, claims processing, and compliance.

"This healthcare model should be about providing healthcare, not just about manipulating payroll," said Dr. John Zabasky, co-founder and Chief Executive Officer of WorXsiteHR, the third-party administrator for HealthWorX. "The future belongs to models that combine a nonprofit mission with disciplined benefits administration."

The IRS has repeatedly addressed arrangements that attempt to exclude cash payments from taxable income under Internal Revenue Code Section 105(b). Section 105(b) generally protects reimbursements for an employee's actual medical-care expenses. However, the IRS has concluded that cash wellness rewards and reimbursements of premiums previously paid through pre-tax salary reduction are included in employees' gross income and treated as wages.

In Chief Counsel Memorandum 201622031, the IRS found that cash wellness rewards and reimbursements of premiums are taxable. Memorandum 201719025 examined employer-promoted arrangements where large pre-tax contributions were returned as purportedly nontaxable cash, while employee take-home pay remained largely unchanged. More recently, Memorandum 202323006 reaffirmed that fixed wellness-indemnity payments are taxable when employees have no corresponding unreimbursed medical expenses.

"These memoranda provide a clear and consistent statement of the IRS's analysis," said Sharon Rowell, co-founder with Zabasky and President of HealthWorX. "They underscore the importance of tying reimbursements to actual medical care and avoiding circular payroll transactions."

HealthWorX believes that this enforcement environment will accelerate demand for models that provide real healthcare value rather than temporary payroll optics. The nonprofit, TPA structure offers employers a path to combine private-sector efficiency, professional plan administration, community benefit, and expanded access to essential care.

HealthWorX successfully completed a U.S. Department of Labor (DOL) audit in 2022, viewing the experience as evidence of the importance of operational discipline, documented plan administration, and accountable governance. DOL audits are routine in the TPA industry, occurring every three to five years, and are necessary to validate ERISA compliance and plan legitimacy.

"Our model is built for the long term," said Rowell. "Employers should ask a simple question: Is the program primarily delivering healthcare, or is it primarily generating a recurring cash payment? HealthWorX is committed to the first."

HealthWorX advances employer-sponsored healthcare through a nonprofit, TPA model that expands access, reduces barriers to care, and supports sustainable benefits administration.