Can a Mississippi city pay employees a $200 annual bonus for getting a yearly wellness check from their primary care doctor?
Plain-English summary
Biloxi wanted to pay each city employee $200 a year as an incentive for getting an annual wellness check with their primary care physician. The city attorney asked whether that was allowed under Mississippi law.
The AG said yes, with the standard performance-based incentive pay rules.
Sections 66 and 96 of Article IV of the Mississippi Constitution prohibit public entities from paying employees extra compensation for past services. Doing so would amount to an unlawful donation. So a "thanks for the great year" bonus paid for past performance is out. But "do this thing in the coming year and we'll pay you" is in, if structured correctly.
The AG distilled the test from earlier opinions (Eleuteris (2013), Campbell (2010), Chiles (2020), Gaskin (2022)). The incentive payment must be:
- Contracted for between the employer and the employee prior to the date the services are to be performed,
- Determined in accordance with objective standards of measurement,
- Earned by personal services performed by the employee.
For Biloxi's wellness program: the city must adopt the policy before employees do their wellness checks. The standards must be objective (e.g., proof of a wellness visit with a primary care physician within the calendar year, documented by a physician's note or claim record). The employee must actually perform the wellness check (or whatever the qualifying service is) to earn the payment.
The AG also flagged the procedural piece. Whether the proposed program meets the requirements is a factual determination for the municipality, made consistent with the facts and entered on the governing authority's minutes. § 25-41-11 requires minutes of all public body meetings, and the AG has long held that "[a] public body may only speak through its minutes" (Custom (2010)).
Two practical pointers:
- The incentive payment is excluded from "earned compensation" for PERS retirement purposes under § 25-11-103(k). Employees receiving the bonus should not expect it to count toward their final average compensation for retirement calculations.
- The program design matters. A bonus tied to actually completing the wellness check is fine. A bonus tied to "good health" or a particular health outcome would raise federal ADA, GINA, and HIPAA concerns that the AG did not address (those are federal-law issues outside official-opinion authority).
What this means for you
If you are a Mississippi city or county HR director designing a wellness incentive
Adopt the program by board action before the qualifying year starts. Spell out the objective trigger (e.g., proof of a wellness visit with a primary care physician between January 1 and December 31). Spell out the documentation employees must submit. Make sure the policy is on the minutes.
The $200 figure is policy choice, not law. Whatever number works for your budget and your wellness goals is fine, as long as the structure satisfies the prospective-and-objective test.
Coordinate with employment counsel on the federal-law overlay. The Affordable Care Act (PPACA), Americans with Disabilities Act (ADA), Genetic Information Nondiscrimination Act (GINA), HIPAA wellness-program rules, and IRS taxation rules all apply to wellness programs. The state-law clearance from the AG does not address any of them. A poorly structured wellness program can trigger federal liability even if it is fine under state law.
If you are a Mississippi city or county employee considering a wellness incentive
Ask whether the program is structured prospectively. If your employer announces in December that everyone who got a wellness check during the past year will get a bonus, that is structurally a problem under Mississippi law (it is paying for past services). The bonus has to be promised before the year starts and earned during the year.
The bonus is taxable income in most cases (the wellness incentive is generally not excluded under IRC § 105 or § 106 unless it is a reimbursement of medical expenses). Plan for the tax withholding.
The bonus does not count toward your PERS retirement calculation. If you are near retirement and the bonus would otherwise pad your final average compensation, that is not what happens here.
If you are a city attorney drafting the policy
Use the three-prong test as your structural checklist. Before drafting, confirm:
1. Adoption date precedes the start of the qualifying period.
2. Trigger is objective and documentable (a physician's note, an EOB from the insurance plan, a self-attestation with random verification, etc.).
3. The qualifying activity is something the employee actually does.
Consider sample language: "Employees who complete a documented wellness visit with a licensed primary care physician between [start date] and [end date] will receive a $200 annual incentive payment, payable on or about [date], as a one-time bonus separate from regular compensation. Documentation must be submitted to HR by [deadline]. Compensation under this program is not 'earned compensation' for purposes of Miss. Code Ann. § 25-11-103(k)."
Get HIPAA-compliant data handling in place for the documentation collection. Privacy of medical records is a federal compliance issue.
If you are a Mississippi mayor or city council member voting on a wellness incentive program
Three things to confirm before voting: (1) the program adoption date is before the qualifying period starts, (2) the trigger is objective enough that everyone knows what counts, (3) the budget supports the projected payout. Add a sunset or annual review clause if you want flexibility.
Be aware that you are creating a recurring obligation to budget for. The state-law clearance does not give you flexibility to skip payments to qualifying employees later.
If you are a PERS administrator processing service credit calculations
Wellness incentive payments under this opinion are not "earned compensation" under § 25-11-103(k) and should not be reported. The Chiles (2020) opinion is the controlling line. Confirm with your retirement coordinator that the payments are coded correctly.
Common questions
Q: Can the city pay the bonus only to employees who attended the wellness check, not those who declined?
A: Yes, that is the structure of the incentive. Payment is for those who complete the wellness check; non-completers don't get the bonus. That is not discrimination; it is the basic structure of an incentive.
Q: Can the city tie the incentive to a health outcome (e.g., maintaining a specific BMI or blood pressure)?
A: That changes the federal-law analysis significantly. Outcome-based wellness programs trigger ADA, GINA, and HIPAA wellness-program rules requiring reasonable alternative standards. The state-law analysis from the AG is the same (objective standards, prospective adoption), but the federal regulatory burden is much heavier. Get specific federal employment-law advice before structuring an outcome-based program.
Q: Does the bonus count as taxable income?
A: Almost certainly yes. Wellness incentive cash payments are typically W-2 wages subject to income tax and FICA. There are limited carve-outs in the Internal Revenue Code; consult a tax professional.
Q: Can the city pay the bonus once at the end of the year or in monthly installments?
A: Either is fine for state-law purposes. Monthly installments may be cleaner for tax withholding. End-of-year lump sum is common for incentive programs.
Q: What if an employee gets the wellness check but cannot get the documentation in by the HR deadline?
A: Build a reasonable cure period into the policy. Hard deadlines without flexibility tend to generate grievances. The state-law analysis is unaffected by reasonable documentation-submission rules.
Q: Does this apply to elected officials?
A: Probably yes, but the opinion didn't expressly address elected officials separately. The same constitutional and statutory analysis would apply. Many cities exclude elected officials from employee incentive programs as a policy matter.
Q: Can the incentive be tied to participation in a city wellness fair instead of a doctor's visit?
A: Yes. Any objective wellness-related activity that the employee actually performs can be the trigger. The structure (prospective adoption, objective standard, personal services) is what matters. Sub-criteria are policy choices.
Q: Can the city's group health insurance plan pay the incentive instead of the city directly?
A: That is a structural variation that may have different federal-law implications (the wellness program then sits inside the group health plan and triggers PPACA's wellness program rules differently). The state-law authority is the same, but consult specific health plan compliance counsel.
Background and statutory framework
Sections 66 and 96 of Article IV of the Mississippi Constitution prohibit donations of public funds. Extra compensation paid for past services has been treated as a donation, because the public got the services already and a later payment is a gift, not compensation.
Performance-based incentive pay is a recognized exception. The AG opinion line (Eleuteris (2013), Campbell (2010), Chiles (2020), Gaskin (2022), and now Abide (2023)) holds that incentive pay is permissible when it is (a) contracted prospectively, (b) determined by objective standards, and (c) earned by personal services. The reasoning: this is not a gift; it is compensation under a prospectively-set agreement.
§ 25-41-11 requires public bodies to keep accurate minutes of meetings and to record final actions. The Custom (2010) opinion line confirms that "[a] public body may only speak through its minutes" — the program adoption and the eligibility determinations both belong on the minutes.
§ 25-11-103(k) defines "earned compensation" for PERS retirement purposes. Performance-based incentives are excluded; they do not count toward the final average compensation used to calculate retirement benefits. The Chiles (2020) opinion is the authority on this point.
Federal-law overlays (ADA, GINA, HIPAA, PPACA, IRC) sit on top of the state-law analysis but are outside the AG's official opinion authority.
Citations
- Miss. Const. Art. IV, § 66 (donation prohibition)
- Miss. Const. Art. IV, § 96 (donation prohibition)
- Miss. Code Ann. § 25-11-103(k) (PERS earned compensation definition)
- Miss. Code Ann. § 25-41-11 (Open Meetings Act minute requirements)
- MS AG Op., Campbell (Apr. 12, 2010) (prospective incentive pay permissible)
- MS AG Op., Custom (Mar. 12, 2010) (public body speaks through minutes)
- MS AG Op., Eleuteris (Nov. 1, 2013) (extra compensation for past services is unlawful donation)
- MS AG Op., Chiles (Nov. 10, 2020) (three-prong test for incentive pay; PERS exclusion)
- MS AG Op., Gaskin (Oct. 11, 2022) (incentive pay framework)
Source
- Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
- Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2023/01/P.Abide-January-24-2023-Incentive-Payment-for-City-Employees-that-Receive-Annual-Wellness-Check.pdf
Original opinion text
January 24, 2023
Peter C. Abide, Esq.
Attorney, City of Biloxi
925 Tommy Munro Drive, Suite H
Biloxi, Mississippi 39532
Re:
Incentive Payment for City Employees that Receive Annual Wellness Check
Dear Mr. Abide:
The Office of the Attorney General has received your request for an official opinion.
Question Presented
May the City of Biloxi add an employee incentive of $200.00 a year for those employees who
receive an annual wellness check with their primary care physician?
Brief Response
A city is authorized to make incentive payments for future performance when it is contracted for
prior to the date when services are to be performed, determined in accordance with objective
standards of measurement, and earned by personal services performed by the employees.
Applicable Law and Discussion
Sections 66 and 96 of Article IV of the Mississippi Constitution prohibit public entities from
paying employees extra compensation for past services because doing so would amount to an
unlawful donation. MS AG Op., Eleuteris at 1 (Nov. 1, 2013). Employee incentive payments that
"are implemented prospectively and for which payment is made pursuant to conditions met in the
future do not run afoul of [the] constitutional provisions." MS AG Op., Campbell at 1 (Apr. 12,
2010). Therefore, if the city wishes to provide employee incentive pay, the incentive payments
must be "(1) contracted for between the parties or with the employee prior to the date when services
are to be performed; (2) determined in accordance with objective standards of measurement; and
(3) earned by personal services performed by the employee." MS AG Op., Chiles at 1 (Nov. 10,
2020); see also MS AG Op., Gaskin (Oct. 11, 2022). Whether the proposed incentive payments
for wellness checks meet the requirements is a determination to be made by the municipality,
consistent with fact, and spread upon the minutes of the governing authority. See Miss. Code Ann.
§ 25-41-11 (requiring minutes to be kept of all meetings of a public body and including "an
accurate recording of any final actions taken at such meeting"); MS AG Op., Custom at 2 (Mar.
12, 2010) ("[A] public body may only speak through its minutes.")
Additionally, though performance-based incentive pay for municipal employees is authorized
when the aforementioned requirements are met, such payments are excluded from "earned
compensation" as defined by Mississippi Code Annotated Section 25-11-103(k) and may not be
reported to the state's Public Employees' Retirement System (PERS) for purposes of retirement.
Chiles at *2.
If this office may be of any further assistance to you, please do not hesitate to contact us.
Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By:
/s/ Abigail C. Overby
Abigail C. Overby
Special Assistant Attorney General