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H.R. 1818, THE WORKFORCE HEALTH IMPROVEMENT PROGRAM ACT: HEALTHY EMPLOYEES;

HEALTHY BOTTOM LINE

HEARING

BEFORE THE

SUBCOMMITTEE ON TAX, FINANCE AND EXPORTS

OF THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

WASHINGTON, DC, JULY 8, 2004

Serial No. 108–71

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

COMMITTEE ON SMALL BUSINESS 

DONALD A. MANZULLO, Illinois, Chairman 

ROSCOE BARTLETT, Maryland, Vice 

Chairman 

SUE KELLY, New York 

STEVE CHABOT, Ohio 

PATRICK J. TOOMEY, Pennsylvania 

JIM DEMINT, South Carolina 

SAM GRAVES, Missouri 

EDWARD SCHROCK, Virginia 

TODD AKIN, Missouri 

SHELLEY MOORE CAPITO, West Virginia 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

TRENT FRANKS, Arizona 

JIM GERLACH, Pennsylvania 

JEB BRADLEY, New Hampshire 

BOB BEAUPREZ, Colorado 

CHRIS CHOCOLA, Indiana 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

NYDIA VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

TOM UDALL, New Mexico 

ENI FALEOMAVAEGA, American Samoa 

DONNA CHRISTENSEN, Virgin Islands 

DANNY DAVIS, Illinois 

GRACE NAPOLITANO, California 

ANI ́BAL ACEVEDO-VILA ́ , Puerto Rico 

ED CASE, Hawaii 

MADELEINE BORDALLO, Guam 

DENISE MAJETTE, Georgia 

JIM MARSHALL, Georgia 

MICHAEL MICHAUD, Maine 

LINDA SA ́ NCHEZ, California 

BRAD MILLER, North Carolina 

[VACANCY] 

[VACANCY]

J. MATTHEW SZYMANSKI, Chief of Staff 

PHIL ESKELAND, Policy Director/Deputy Chief of Staff 

MICHAEL DAY, Minority Staff Director

SUBCOMMITTEE ON TAX, FINANCE AND EXPORTS 

PATRICK J. TOOMEY, Pennsylvania 

Chairman 

STEVE CHABOT, Ohio 

MARILYN N. MUSGRAVE, Colorado 

JIM GERLACH, Pennsylvania 

BOB BEAUPREZ, Colorado 

TRENT FRANKS, Arizona 

JIM DEMINT, SOUTH CAROLINA

CHRIS CHOCOLA, Indiana 

[RANKING MEMBER IS VACANT] 

JUANITA MILLENDER-MCDONALD, 

CALIFORNIA

ENI F. H. FALEOMAVAEGA, American 

Samoa 

DANNY K. DAVIS, Illinois 

DENISE L. MAJETTE, Georgia 

JIM MARSHALL, Georgia 

MICHAEL H. MICHAUD, Maine

JOE HARTZ, Professional Staff

(II) 

C O N T E N T S 

WITNESSES

Page 

McCarthy, Mr. John, Executive Director, International Health, Racquet & 

Sportsclub Association ......................................................................................... 3

Foulke, Mr. Edwin, Jr., Esq., Attorney at Law, Jackson Lewis, LLP. ................ 5

Brinson, Mr. John, Owner, Lehigh Valley Racquet and Fitness Centers ........... 7

Fehrmann, Mr. David, Director of Brand Standards & Operating Systems, 

USA Management, Inc. ........................................................................................ 8

Silberman, Ms. Karen, Executive Director, National Coalition for Promoting 

Physical Activity ................................................................................................... 11

APPENDIX

Opening statements: 

Toomey, Hon. Patrick J. ................................................................................... 29

Prepared statements: 

McCarthy, Mr. John, Executive Director, International Health, Racquet 

& Sportsclub Association .............................................................................. 31

Foulke, Mr. Edwin, Jr., Esq., Attorney at Law, Jackson Lewis, LLP. ......... 34

Brinson, Mr. John, Owner, Lehigh Valley Racquet and Fitness Centers .... 39

Fehrmann, Mr. David, Director of Brand Standards & Operating Systems, USA Management, Inc. ...................................................................... 42

Silberman, Ms. Karen, Executive Director, National Coalition for Promoting Physical Activity ............................................................................... 45

(III) 

(1)

H.R. 1818, THE WORKFORCE HEALTH IMPROVEMENT PROGRAM ACT: HEALTHY EMPLOYEES; HEALTHY BOTTOM LINE 

THURSDAY, JULY 8, 2004

HOUSE OF REPRESENTATIVES

SUBCOMMITTEE ON TAX, FINANCE & EXPORTS

COMMITTEE ON SMALL BUSINESS

Washington, DC 

The Subcommittee met, pursuant to call, at 10:08 a.m. in Room 

311, Cannon Office Building, Hon. Pat Toomey presiding. 

Present: Representatives Toomey, Chabot, Chocola and 

Millender-McDonald

Chairman TOOMEY. Good morning, everyone, and welcome. 

Thank you all for being here today as we discuss H.R. 1818, the 

Workforce Health Improvement Program Act. I would especially 

like to thank all of our witnesses who have agreed to testify before 

the Subcommittee this morning, and who have traveled to be with 

us today. 

I appreciate you being here. We do expect some other members 

will be arriving as we proceed with this, but I want to respect 

everybody’s time and get started at this point. Let me just say a 

few things about the idea behind this bill. 

You know, it is about a number of things but there are certain 

fundamental ideas that we all know and they are under the underpinning for this idea. The fact is that exercise and weight management are critical to maintaining a healthy lifestyle. I think we all 

understand that. 

And public health experts unanimously agree that people who 

maintain active, healthy lifestyles dramatically reduce their risk of 

contracting a wide variety of chronic diseases. 

A physically fit population results in a decrease in health care 

costs, lower government spending, fewer illnesses, improved worker 

productivity, and most importantly of all, a better quality of life for 

the people who choose to remain fit. 

Exercise itself is a proven and cost effective method of preventative medicine, and it is an effective way of treating many of the illnesses that many Americans are confronted with today. 

Unfortunately, 60 percent of all Americans are still physically inactive, and that contributes significantly to the growth in our Nation’s obesity rate to where it is today, near epidemic proportions. 

2

The Centers for Disease Control and Prevention, the Rand Corporation, the Surgeon General, and countless other experts consistently document that obesity, often exacerbated by this lack of physical activity, is in fact the number one health problem in the 

United States today. 

And given the tremendous benefits that exercise provides, it just 

makes sense to remove the obstacles that keep folks on the couch 

and not leaving a healthy lifestyle. Currently, about almost 98 percent of health care expenditures are spent on curative measures. 

The approach that the WHIP Act takes is that prevention could 

lead to dramatic reductions in the cost of medical expenses in the 

U.S., which by the way are estimated to double to $2.6 trillion by 

the end of this decade. 

The Centers for Disease Control and Prevention have concluded 

that the potential savings in direct medical costs, if all inactive 

adult Americans engaged in regular exercise, could be as high as 

$77 billion annually. 

By enacting the WHIP Act, we could take a significant step towards encouraging the use of fitness centers, which would lead to 

a healthier population, which would in-turn decrease health care 

costs, reduce government spending, and help prevent debilitating 

illnesses. 

Most importantly, it will demonstrate that a better quality of life 

is attainable even with relatively minor behavioral changes. Not 

only is this a health improvement bill, but it is also a tax equity 

bill in my mind. 

Under current Federal tax law the value of on-premises athletic 

facilities that are provided by employers to their employees are not 

counted as employee income. However, if an employer does not 

have the resources to build facilities on premises, but instead provides health club services to employees at an off-site facility, the 

value of that benefit is included as taxable income to the employee. 

It strikes me that this is a flagrantly inconsistent and unfair approach. It is especially unfair to employees of small and mediumsized companies, and I see no reason why this should continue. 

I think this inequity in fact needs to be corrected, and that is exactly what the WHIP Act does. It simply says that wellness benefits would be excluded and not considered taxable income for the 

employee. 

Another benefit that can be realized through this legislation is 

the direct effect it will have on the workplace. H.R. 1818 would 

provide employers with more options when creating compensation 

packages for recruiting and retention efforts, and as our economy 

continues to grow, the competition for qualified employees increases. Employers need as many tools as possible to recruit and 

retain the best possible employees. 

This again is especially true for small and medium-sized businesses, which often don’t have all the options that large companies 

have at their disposal. By way of conclusion it is just a simple fact 

that America is getting heavier, less physically active, and that is 

very unhealthy. 

America is also getting older. As the leading edge of the baby 

boomer generation is beginning to retire, this is going to force the 

3

American taxpayers to continue to pump very large sums of money 

into health care in general, and Medicare in particular. 

If we enact legislation that would encourage fitness and weight 

management, not only will Americans tend to lead healthier lifestyles, but we would lower the total cost of curative health tactics, 

both now and in the future. 

The old saying of an ounce of prevention is worth a pound of cure 

I think is relevant in this case. I am happy to note that there was 

what I thought was a reasonably favorable article about this idea 

recently in the Washington Post, specifically referring to this bill 

that is under consideration. 

So it is my hope that we can generate some more interest in this 

bill and that Congress will consider this most likely as part of a 

broader tax package. I think this deserves every consideration. 

So I am again grateful for the witnesses for coming here today 

to share your thoughts about the merits of this bill. Having said 

that, I would be happy to yield to my colleague if he has an opening comment. 

And if not, then I will move right on to the witness introduction. 

The leadoff witness today will be a Mr. John McCarthy. Mr. 

McCarthy is the Executive Director of the International Health 

Racket and Sports Club Association. 

He earned his undergraduate degree from the University of 

Notre Dame, and has received Masters degrees in Philosophy, Theology, and Business Administration. Mr. McCarthy has spent his 

life in and around the sports and fitness arena, beginning with his 

selection by the New York Knicks in the 1958 NBA draft. 

Later, he began—I am a big fan of basketball, and I used to play 

a lot of basketball, and I just mention this to suggest how little we 

have in common, because my high school basketball coach took me 

aside early in my career and said, ‘‘you know, Pat, you are small, 

but you are slow.’’ 

And that is when I began to think that an NBA draft was not 

terribly likely in my case. But to get on with Mr. McCarthy, I am 

very grateful that he has agreed to testify today, because he has 

such a great range of experience in fitness. 

He began a career as a theology teacher while coaching both basketball and tennis at colleges in Minnesota and Massachusetts. 

Prior to joining the International Health, Racket, and Sports Club 

Association, he was the executive director of a regional trade association for sports clubs in New England. 

Mr. McCarthy, I thank you for joining us today, and I welcome 

your testimony. We will have a five minute system. We will have 

a green light. We will be on for four minutes, and when you are 

down to one minute remaining, the light will change to a yellow 

light. 

And when five minutes is up, the red light will come on, and if 

we could all try to stick to that program, we will be able to proceed 

in an orderly and efficient fashion. So again, welcome, and thank 

you, and I invite your testimony. 

[Chairman Toomey’s statement may be found in the appendix.] 

STATEMENT OF JOHN MCCARTHY, INTERNATIONAL HEALTH, 

RACQUET & SPORTSCLUB ASSOCIATION

4

Mr. MCCARTHY. Thank you very much. It is a privilege to be 

here, and I want to thank also my colleagues who are here. I am 

from Boston, Massachusetts. I am the Executive Director of the 

Trade Association for Private Sector Fitness Centers in the United 

States. 

We have 4,500 members that represent an industry that serves 

almost 40 million Americans as members and another 16 million 

as patrons. So there is about 60 million Americans who use fitness 

centers on a regular basis in America. 

I think we are all aware that as the Chairman pointed out that 

we are going through a health care crisis in the United States. The 

Kaiser Family Foundation recently reported that the family cost of 

health insurance right now is approaching $9 thousand and is expected to be $15 thousand by 2008. 

We are also aware, because the CDC has just told us that obesity 

is expected to become—that obesity related diseases is expected to 

become the number one killer in the United States by 2005. 

We are also aware as the Chairman pointed out that regular exercise is key, not only to the prevention of obesity, but it is key to 

the prevention of heart disease, hypertension, Type II diabetes, 

several forms of cancer, stroke, et cetera. 

So we are all aware of how essential regular exercise is to the 

improvement of the health and productivity of Americans generally. We are also aware thanks to the Society for Human Resource Management that this bill, if passed, would have a huge impact on corporations’ willingness to subsidize employee fitness. 

The poll that is over there on my right indicates that 67 percent 

of small business employers said that they would more positively 

consider subsidizing the fitness of their employees if this bill was 

passed. 

Mr. Chairman, this bill, as you pointed out correctly, is really a 

technical correction. Big businesses that have on-site corporate fitness centers, those fitness centers, that subsidy are not imputed as 

taxable income to the employees of those big businesses. 

However, small businesses that subsidize the participation in 

regular exercise of their employees, that subsidy is imputed as taxable income to the employee. So what we are really trying to do is 

level the playing field between on-site fitness and off-site fitness. 

An example of this here is right here in Congress where there 

is an on-site fitness center for the Members of Congress, and all 

the 15 thousand young men and women who work here are off-site 

fitness, they get taxed on their subsidy; whereas, the Members of 

Congress don’t get taxed on their subsidy. 

Mr. Chairman, we are very thankful for you developing this bill 

and proposing this bill, and we hope that you will continue to support it. Thank you very much. 

[Mr. McCarthy’s statement may be found in the appendix.]

Chairman TOOMEY. Thank you very much. And if—okay. In that 

case, I will introduce our next witness. The next witness that we 

have with us today is Mr. Edwin Foulke, a practicing partner at 

the law firm of Jackson, Lewis, L.L.P. 

Mr. Foulke has extensive experience in labor and employment 

law as evidenced by his 20 years of specializing in this area of the 

5

law. Additionally, in 1990, he was appointed by former President 

George H. W. Bush to a vacancy on the Occupational Safety and 

Health Review Commission, later rising to commission chairman. 

He also served the current President Bush as a member of the 

Bush-Cheney transition policy advisory panel for the U.S. Department of Labor. Thank you very much for being with us today, Mr. 

Foulke, and I welcome your testimony. 

STATEMENT OF EDWIN FOULKE, JR., JACKSON LEWIS, LLP.

Mr. FOULKE. Thank you very much, Mr. Chairman. And I feel 

doubly honored to be here. First, to be honored that you have given 

me the privilege to be able to testify before this Subcommittee, and 

second, I am honored to be here to be representing the Society for 

Human Resource Management. 

As you are aware, SHRM, as the acronym is known, is the 

world’s largest association devoted to human resource management, representing more than 185 individual members. The society’s mission is both to serve the human resource management professional, but also to advance the HR profession. 

You can see how it is advancing it by seeing what are the major 

issues, and clearly the issue that you are trying to address here 

today in H.R. 1818 is an important issue to employers across the 

country and to H.R. professionals across the country, and probably 

across the world. 

And as the earlier speaker alluded to the survey that was done 

by SHRM, clearly the membership is very, very much interested in 

this particular benefit for its employees, and they recognize the importance of this. 

Now, I am going to kind of come probably from a little bit different standpoint than the rest of the members. You know, I have 

kind of committed to legal career to focusing in on the health and 

safety of employees. 

And I kind of see where this country is going. You are seeing a 

lot of problems as employees grow—the workforce that is going to 

be coming into play here is going to be more and more overweight 

unfortunately. 

The people that came in before; our fathers, and our grandfathers, and our great grandfathers, when they came to work in 

their teens and twenties. They were in fairly fit condition, but now 

the workforce that is going to be coming is going to bring a number 

of associated problems. 

You are going to see, first of all, that they are going to become 

injured much earlier in their work career, and if you look at the 

statistics previously, persons that got injured more than likely got 

injured in the later part of their working career, and into their forties and fifties. 

We are going to have employees that are going to be coming in 

that are going to start getting injured in their twenties, and this 

is going to skyrocket workers comp costs dramatically. 

And this is going to be most acutely felt by the small businesses, 

because any of those types of costs are going to be much more or 

less likely to be spread out to their customers or anything else. So 

they are going to be focused on that. 

6

So you are going to see a lot of small businesses dramatically impacted by increases in workers compensation if we don’t deal with 

this problem now. Secondly, you are going to have a workforce that 

is incoming that is going to have health problems already when 

they arrive at the work site. 

We are already seeing a dramatic rise in Type-I child diabetes, 

and that is going to also see an increase in Type-II diabetes as people come to work. This is going to dramatically increase health care 

costs for employers, and it is not going to be just the employees 

that are coming to work, but it is going to be their families that 

are going to also have this serious problem. 

And that is going to tremendously impact the costs to employers 

on health care, and one of two things can only occur as a result 

of that. Either they are going to pass that cost on to the employees, 

which they unfortunately are not going to be able to afford. 

Or secondly, they are going to start reducing their benefits and 

the amount of health care coverage potentially even eliminating 

the health care coverage to their employees. 

So this is a really critical issue that we really need to get a hold 

of here. As I see it, H.R. 1818 is going to help employers and employees in a number of different ways. Once as you start getting 

people more healthier, they are going to have the possibility of 

them having injuries is going to be greatly diminished. 

If people are working, and as an employee starts exercising, their 

muscle tone is going to be strengthened, and the likelihood of them 

having back injuries or muscle strains are going to dramatically increase. 

And this is right now the number one work related problem in 

the United States. Also, as you increase the issue of health issues 

and exercise, you are going to have better muscle tone in your 

lower extremities, and so you are going to see a decrease possibly 

in carpal tunnel syndrome and tendinitis. So it will have that benefit. 

Secondly, as the workforce becomes more healthier associated 

with this, you are going to see less injuries and you are going to 

see less heart disease, less stroke, less stress. I mean, exercise has 

been demonstrated to have a greater impact on reducing stress in 

the workplace. 

That could have a two toll effect. First of all, stress is a major 

factor in workplace violence across the country. Now, I have dealt 

with a lot of issues, and a number of situations where stress has 

been directed related to where we have had violence in the workplace. 

Secondly, I find what is interesting is that there was an article 

that came up yesterday talking about workplace stress hitting the 

waistline, and in particular it was a study done out of College 

Park, Pennsylvania, that talked about how it affecting women, and 

the more stress on women, the more that they ate, and thus the 

more weight that they gained. 

And it was kind of a continual cycle here, and so hopefully one 

of the benefits that you are going to see on your bill is this education of stress, and which to me will help eliminate a lot of associated problems in particular due to the incidents of workplace violence, which has been increasing over the last several years. 

7

But overall, and I know that my time is about up, clearly I think 

the work or the employers here really are interested in having this 

bill based on the statistics for a number of different reasons. First, 

one, healthy employees are going to be more productive. 

Two, healthier employees are going to experience lower incidence 

of workplace injuries. Third, employer participation will provide a 

variety of tools of recruitment and retention valuable there. 

So you are going to have a series of things here that are going 

to be very helpful to employees. This is just clearly one step in 

dealing with the obesity problem, but is an important first step. 

And I commend you for championing this issue. Thank you. 

[Mr. Foulke’s statement may be found in the appendix.]

Chairman TOOMEY. Next we have Mr. John Brinson, president 

and CEO of Lehigh Valley Racquet and 24/7 Fitness Clubs in and 

around the greater Lehigh Valley in Pennsylvania. Mr. Brinson 

earned a Bachelor of Science from the U.S. Military Academy at 

West Point, and began his military service as an officer in the U.S. 

Army Airborne Rangers. 

Following his service to our country, he spent some time in the 

insurance field before opening his first fitness club in 1979. He 

served on the board of many organizations throughout the Lehigh 

Valley and beyond. 

Mr. Brinson is my constituent and I am very happy to see him 

here. I welcome your testimony, and I look forward to our discussion today. Welcome. 

STATEMENT OF JOHN BRINSON, LEHIGH VALLEY RACQUET 

AND FITNESS CENTERS

Mr. BRINSON. Thank you, Chairman Toomey, and other Committee members. I am honored to be here today. This is a very important Committee. Small Business is the impetus, the driving 

force behind the economy in the United States. It is small business 

that drives our free market economy. 

I am a member of the National Federal of Independent Business 

and have been for over 30 years. It is the premier small organization in the country. I am a founding member of John McCarthy’s 

wonderful association, the International Health Racquet and Sports 

Club Association, and I enjoyed hearing John McCarthy’s testimony this morning. 

My testimony has been typed and is available to all the Committee members, and rather than just read it, I would like to concentrate on a couple of things that John McCarthy touched on, and 

also that Ed Foulke touched on. 

This program is subsidized fitness benefits for employees, although it is an employee benefit, it is far more than that. It is a 

benefit for the employer. It is a benefit for the business. 

I see it personally. My business has 300 employees, and I see it 

personally. Those who exercise and those who are fit are more productive. And that is the key to the economic future of the United 

States; productivity of our workforce. 

Employees who are fit show up for work more often than those 

who are not. They show up on time more often. They show up with 

8

good attitudes. Their morale is good. They can handle stress a lot 

better as Ed mentioned before. 

They have more endurance. They can work longer and harder, 

and are more productive than non-fit employees. So their output is 

better. They are more productive. They take fewer sick days. I just 

looked at my own record of sick days and nationally the number 

of sick days taken by employees is approximately six sick days per 

year. 

Companies that are supporting fitness, and there are a number 

of them here, and I will leave the Committee some brochures prepared by John McCarthy’s association, and the title of this brochure is the Economic Benefits of Regular Exercise. 

These are success stories of businesses that subsidize fitness. 

They have found that their number of sick days is approximately 

2 to 3, rather than 5 or 6, which is the national average. 

In my company, our sick days average 1.2 sick days per full-time 

employees. So there are fewer sick days, meaning better productivity, lower health insurance costs, as has been mentioned already, 

better retention. 

People who have good morale and who are fit, and who are more 

productive, are happier employees and they tend to stick with their 

employers longer than those who are not fit. And as has also been 

mentioned by Ed Foulke and others, it is a very, very good recruiting tool for businesses. 

So in summary, we are talking about a benefit for the employees, 

but we are talking about also—and perhaps even more importantly—a benefit for the employer, and for our economy. 

So I commend you, Chairman Toomey, on your sponsorship of 

this very important legislation, and I hope that your colleagues in 

the Congress will support it. Thank you for hearing me today. 

[Mr. Brinson’s statement may be found in the appendix.]

Chairman TOOMEY. Thank you very much for coming here and 

for your testimony. Next we have Mr. David Fehrmann, Director 

of Brand Standards and Operating Systems at USA Management 

here in the D.C. Metro area. 

Mr. Fehrmann earned a Bachelor of Science in Business Administration from Southeast Missouri University, and then spent 32 

years working for the John Deere Company in a wide array of capacities. 

In addition to his work as Director of Brand Standards, and Operating Systems for USA Management, he is also the general manager of the Courtyard by Marriott in Springfield, Virginia. Mr. 

Fehrmann, I appreciate your time and look forward to your testimony. 

STATEMENT OF DAVID FEHRMANN, USA MANAGEMENT, INC.

Mr. FEHRMANN. Thank you, Chairman Toomey. I appreciate 

being invited to attend today. I am representing small business 

also and I wanted to tell you just a little bit about USA Management, Incorporated, which is located here in the District on twentysecond street. 

9

We have been headquartered at that location continually since 

1946. I am employed by the company as the Director of Brand 

Standards and Operating Systems, and that does include human 

resource development. 

In small business, many times, as I am sure you are aware, you 

find yourself wearing multiple hats and I am no different. Our 

business is as a hospitality company, and it includes restaurants 

and hotel operations, hotel management company, some office 

buildings, and we are all located here in the D.C. Metropolitan 

area, and we employ about 225 people. 

We are undergoing an expansion project at the current time, and 

in three years, we are going to expand into some additional markets. We will have tripled the size of our business, and our employment will escalate from currently 225 to about a thousand people. 

I would like to tell you that we are currently offering state-ofthe-art health care facilities at our headquarters and in remote locations for our employees, but we are not. We just simply can’t afford the cost, and we can neither allocate the expense or the capital 

in the space to such facilities. 

Our CEO, however, is a very health conscious individual, and realizes that there is considerable value in keeping personally fit, 

and a number of years ago, he contracted with a health club facility 

in the District, and provided membership to a group of managers 

and key employees. 

About 10 percent of our current full-time employee base is involved in health club activity. The cost of this health club participation is roughly $150 a month per employee, and is borne solely by 

the company at this time. 

The total annual cost is $30 thousand and that is a significant 

expense to a small family-owned business like ours. Employee 

usage is monitored, and it is provided on a use it or lose it basis, 

and most of our employees do participate actively. 

Restaurant employees and hotel employees are sometimes staggered by the long hours that they must keep. Many of our key employees will work double-shifts or even around the clock to support 

our businesses and take care of our customers. 

I am sure that is the same that many other small business owners would tell you. It takes people who are willing to work long 

hours, and people who can wear several hats, and who are successful in the small business atmosphere. 

Our owners have recognized that a physically fit business person, 

or excuse me, a physically fit employee with a neat and trim look 

is advantageous to our business. We consider healthy and happy 

employees a valuable asset. 

Our company needs to attract high quality employees and we 

continually seek out the most qualified people that we can find. Besides meeting our job requirements, they tend to be energetic, charismatic, and physically fit. 

They are leaders who will attract and surround themselves with 

others just like themselves. Some of the direct benefits of a regular 

workout regimen include general improvement in overall health, 

reduced weight, increased energy levels, and generally a reduced 

stress level. 

10

I see employees who are completely stressed out by the events 

of the day happening around them, leave the facility and go for a 

45 minute workout, and then return to work absolutely refreshed, 

energized, and ready to get back to work. 

These people produce more, and they work well under pressure, 

and they present a calm, outward appearance to those around 

them. They tend to lead by example and I believe that the people 

who work out regularly are more competitive. 

They seem to have increased stamina, and they ultimately perform better in our business. This bill has the advantages of helping 

us in our business. It is going to level the playing field on tax deductions, and that is something that a small decentralized business 

like ours needs. 

And employees of both large and small business enterprises that 

work out as part of an employer-sponsored program should not be 

taxed on that value. Maintaining a healthy lifestyle that includes 

vigorous exercise and a weight loss program is so important that 

we should remove any obstacles that would prevent its use. 

I told you that we are engaged in expansion projects. I don’t foresee health club, or private health club facilities at any of our locations, but I do see expanded health club benefits offered to employees. 

We want to continue to reap the benefits of a more physically fit 

employee base. We must continue to offer competitive wages, competitive health care, and competitive indirect compensation packages to attract the workforce that we need, and a benefit package 

that includes some form of health club participation is going to be 

both good for our company, and for the employee. 

We are also focused on our largest expense, the cost of providing 

health care insurance coverage to our employees. We have been 

staggered by the rapid escalation of health care costs over the last 

several years. 

Those premiums have been increasing well over 10 percent a 

year, and are expected to continue. We believe that improving the 

health of the population in general and specifically our employee 

base, can help reduce these future increases, and we intend to do 

our share to control the rapidly rising costs of providing medical 

coverage to our employees. 

In conclusion, I just want to say that our business is growing and 

we will need to recruit a hundred key people in the next several 

years, and it is going to take a complete employment package, including direct compensation and benefits, to attract the right people. 

Health club participation is going to be part of those benefits if 

we can continue to see the on-job related benefits of health club 

participation, and also see reduced health care insurance premiums 

at the same time, we can get a double-impact from the dollars that 

we spend. 

And that is the kind of impact that impresses a small business 

owner. It is the kind of expense that is easy to justify. Passage of 

House Bill 1818 , will help small business get there, and I urge you 

to move it forward. Thank you for inviting me today. 

[Mr. Fehrmann’s statement may be found in the appendix.]

11

Chairman TOOMEY. Thank you very much, Mr. Fehrmann. Last, 

but certainly not least, rounding out our panel is Ms. Karen Silberman. Ms. Silberman is the executive director of the National Coalition for Promoting Physical Activity. 

She earned her undergraduate degree in sociology from Overland 

College in Ohio, and a Masters of Public Affairs, Non-Profit Management, from Indiana University. Ms. Silberman has an impressive resume of work for various nonprofit organizations, including 

the Coalition for the Homeless, the American Heart Association, 

Points of Light Foundation, and of course her current role of executive director of the NCPPA. 

Ms. Silberman, thank you very much for being with us today, 

and I look forward to your testimony. 

STATEMENT OF KAREN SILBERMAN, NATIONAL COALITION 

FOR PROMOTING PHYSICAL ACTIVITY

Ms. SILBERMAN. Thank you. The National Coalition for Promoting Physical Activity is a coalition of major health, fitness, and 

recreation organizations working to advance policies and programs 

that encourage physical activity. 

NCPPA was created in response to the 1996 Surgeon General report on physical activity and health. The American College of 

Sports Medicine, the American Heart Association, and the American Alliance for Health, Physical Education, and Recreation, and 

Dance, convened the coalition as a way to advocate and educate 

Americans on the importance of regular physical activity. 

NCPPA has since grown to include a broad cross-section of national and local organizations, including Federal Agencies, corporate partners, trade and professional associations, and national 

charitable organizations. 

Our members are as diverse as the International Health, Racquet, and Sports Club Association, the American Cancer Society, 

AARP, the YMCA, the National Recreation and Park Association, 

and the NCAA. 

NCPPA’s members independently address a host of issues pertaining to physical activity, including health science, education, environment, population-specific outreach, and activity behavior. 

By working together and building on existing relationships in the 

public and private industry sectors, NCPPA is developing new alliances and partnerships to focus and coordinate public education 

campaigns, policy development, and media education. 

Our work is motivated in-part by the alarming rates of obesity, 

chronic disease, and inactivity in our country. America faces a 

health crisis of epidemic proportions. Physical inactivity, combined 

with being overweight, has in less than 30 years made the United 

States a nation of overweight and out-of-shape individuals. 

According to the Centers for Disease Control and Prevention, the 

incidents of overweight or obesity among adults increased steadily 

from 47 percent in 1976 to 61 percent in 1999. 

Despite proven benefits of physical activity, more than 60 percent 

of Americans do not get enough physical activity to provide health 

benefits. And as I like to say, the Surgeon General once said that 

12

physical activity is so important that it should be made an honorary vitamin. 

Obesity is a significant risk factor for developing chronic disease, 

such as diabetes, asthma, and heart disease. Physical inactivity 

and obesity now rank second after tobacco use as the leading cause 

of death in the United States. 

The newest figures estimate that 400 thousand deaths annually 

are attributable to poor diet and inactivity. In 2000, the costs associated with physical inactivity, obesity, and related chronic conditions was estimated to be $117 billion. 

Moderately intense daily physical activity has long been recognized as an essential ingredient to a healthy life, but increasing 

physical activity has been engineered out of Anericans’ daily lives. 

We have yet to find the solution. 

We know that old problems and initiatives aren’t working and 

the statistics illustrate a deepening problem. What we do know is 

when physical activity is incorporated into a person’s daily life, it 

is more likely to become a habit and more likely to provide lasting 

health benefits. 

One of the best delivery systems to reach the American adult 

population is the workplace. When an employer provides for or encourages physical activity among its employees, the benefits can be 

considerable, including significant health care cost savings, a decrease in absenteeism, competitive advantages in attracting and retaining highly qualified employees, and promoting the business of 

co-employees. 

The WHIP bill is not a cure all, but it is a step in the right direction. It provides the flexibility and incentive to both employers and 

employees to make physical activity part of their daily routine. 

The WHIP bill encourages employers of all types and sizes, 

whether they have in-house or off-site premises or fit facilities to 

offer an exercise benefit to their employees. 

Most importantly, the WHIP bill levels the playing field between 

small businesses and large corporations by assuring that small 

businesses receive the same opportunities to improve their health 

as those of large corporations. 

It is time to make a change and although NCPPA does not believe that we can legislate individual behavior change, we do believe that we can make our physical environment more conducive 

to being physically active. 

The WHIP bill addresses this issue head-on. It makes the environment as tax friendly as possible, and provides the most flexibility to employers to create fitness programs. 

It incentivizes those small businesses that want to do the right 

thing, and eliminates a road block to those small business employees who want to live a more healthful lifestyle. 

NCPPA strongly believes in tax incentives as a way to encourage 

physical activity. Our board of directors recently decided to make 

this concept our signature issue. The idea is a novel one, linking 

tax benefits to healthier lifestyles is an innovative way to combat 

obesity. 

Although the Federal Government and the medical community 

have done a good job of studying and advertising the risks of inacVerDate 0ct 09 2002 22:49 Jun 08, 2005 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 G:\HEARINGS\96504.TXT MIKE
13

tivity, no one has offered real incentives to the average American 

to change behaviors. 

Measures such as the Impact bill and others do not provide the 

degree of motivation that a tax break and its associated economic 

benefits would. NCPPA is glad to be taking the lead on the way 

that we address physical inactivity and related chronic diseases. 

We believe that there is broad public support for measures that 

will make it cheaper for individuals to join fitness centers, pay for 

preventive health maintenance programs, lose weight, and stay active. We will continue to advocate and educate around these issues, 

and look forward to working with the Committee on Small Business on these initiatives.[Ms. Silberman’s statement may be found 

in the appendix.]

Chairman TOOMEY. Thank you very much for your testimony. I 

want to thank you all. I appreciate it very much. I have several 

questions that I would like to begin with. First of all, I would like 

to address the issue of just how broadly beneficial this idea could 

be, and perhaps one way to look at this is to think about what percentage of employers in America today actually have their own fitness facility therefore might not be terribly interested in this bill. 

I suspect that it is a tiny percentage. Does anybody know? It has 

got to be a very, very small number. Can anyone hazard an estimate? 

Mr. MCCARTHY. My sense is that there is probably several thousand, as many as five thousand corporate fitness centers around 

the United States, but let me give you, Mr. Chairman, an example. 

Federal Express has a magnificent fitness center at its world 

headquarters in Memphis, Tennessee. However, they have employees all over the United States, and Pepsi Cola is the same way. 

The have a magnificent fitness center in Purchase, New York, 

but 99.5 percent of their employees are elsewhere. So the on-site 

fitness centers only really cover probably 1 to 2 percent of the total 

employees in the United States. And the need for off-site fitness 

centers is inordinate. 

Small business has this disadvantage, and have what I would 

consider an unfair tax treatment and just don’t have the opportunity to have the same kind of access to health care. 

Chairman TOOMEY. Mr. Brinson, would you like to add to that? 

Mr. BRINSON. In the Lehigh Valley, with a population of between 

6-to-700 thousand, there is only one corporate fitness center. No 

other employers except for colleges and universities have fitness 

centers for their employees. 

Also, I wanted to emphasize that the—well, I, by the way engage 

myself almost full-time in trying to sell corporate fitness memberships, and it is a huge disincentive to have this tax treatment. 

Once an employer hears that he has to give a 1099 to his employees for subsidizing their fitness, he is not interested any longer. It 

is very, very difficult to get employers to subsidize fitness under 

the current rules.

Chairman TOOMEY. Thank you. Another question that I would 

like to touch on is that we touched on some things that all know 

intuitively to be true. I am wondering if there is any empirical 

14

data, and whether you have it with you today, or whether you can 

refer it to the Committee, such as a correlation between physical 

fitness and lower incidents of workplace injuries, lower incidents of 

absenteeism as Mr. Brinson provided with respect to his company, 

productivity of workers? 

Do we have any objective studies that have been done that document this?

Mr. MCCARTHY. Mr. Chairman, we brought to you an entire document on this.

Chairman TOOMEY. On just that.

Mr. MCCARTHY. And that features the documented productivity 

gains and health care cost gains of companies that do subsidize fitness, and we will leave that with you.

Chairman TOOMEY. Terrific. And without objection, we will include that in the record.

Chairman TOOMEY. I appreciate that. I think that it is just important to be able to back this up with factual objective scientific 

criteria, and there is plenty there. So let us include that. I appreciate that. 

Mr. Fehrmann, a question for you. You know, I think of your 

company, which many would consider a small business, but certainly a substantial small business, as one that is soon to embark 

on very significant growth. 

And yet you certainly don’t have the resources to build your own 

fitness facility. Do you see that ability anytime soon, or is employing the kind of benefits that we have been talking about the much 

more likely avenue for your company for the foreseeable future?

Mr. FEHRMANN. Mr. Chairman, I don’t believe that we would 

ever construct the facilities, and own those, and operate them ourself. We are going to be a largely decentralized company, with 

small workforces scattered over a large area, and I don’t think the 

impact would be there if we were to embark on that ourself. 

Rather, I think our course is probably going to be to seek out the 

providers of health club facilities in each one of the city locations 

where we establish businesses.

Chairman TOOMEY. And I suspect that is just the case for the 

overwhelming majority of companies. Well, thank you for that. At 

this time, I will yield to my friend, the ranking member and the 

gentle lady from California.

Ms. MILLENDER-MCDONALD. Thank you so much, Mr. Chairman, 

and let me just kind of give an overview of what I would have said 

had I not gone to the Small Business Committee, thinking that is 

where we were. And so I had to rush over here, and so perhaps I 

need to check my heartbeat to see just how well it is. 

But I do thank you for convening this. I want to thank the witnesses who have come before us today. There is no doubt that fitVerDate 0ct 09 2002 22:49 Jun 08, 2005 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 G:\HEARINGS\96504.TXT MIKE
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ness and overall health are linked. Many Americans are on a quest 

to improve their personal health and fitness. 

And, in-turn, good health results and a stronger and a healthier, 

and more energetic workforce. We do understand though that this 

workforce is growing rapidly to minorities, and given that, your 

workforce will be looking differently than what it looks today, and 

over the next decade. 

So we look at 70 percent of Americans are sufficiently inactive, 

and thereby are classified as sedentary, with over 30 percent are 

considered obese, and then we draw on statistics such as over 60 

percent of African-Americans and Hispanic Americans are overweight, and low income minority women prove to have the greatest 

likelihood of becoming overweight. 

We all know this. I am one who really do appreciate and know 

the value of a productive, healthy workforce. As a former personnel 

director in both the private and the public sector years ago, I recognize that immensely, because I know that it reduces absenteeism 

and just a lot of other things. 

And while we need to encourage Americans to improve their 

health status, I introduced—we must also recognize that we cannot 

as the young lady said, we cannot legislate behavior. We really cannot do that. 

Irrespective, I have given sometimes, and this is with my own 

money, invested in a health club, and have gone few times as what 

that health club fee asks for. But we cannot do that, and yet when 

you see your workforce growing more and more, women and minorities, you are going to be faced with some health related problems with them coming on as Mr. Foulke said. 

And it is true that you will see that as you have a different type 

of employee. My question to all of you as I see the majority of our 

witnesses, Mr. Chairman, are health club related witnesses, and it 

does not seem to have any small businesses and minority business 

witnesses here today, who can speak to their problems that they 

have, ongoing problems, of just trying to stay afloat. 

But I would like to ask all of you are your businesses—do any 

of your businesses have an employment of under 50 employees? Do 

you have under 50 employees at your different businesses?

Mr. FOULKE. I would say that I represent a lot of small business, 

mom and pop companies, all the way to Fortune 500. So I have 

dealt with a lot of different companies, but very small companies, 

and surprisingly that is the area that I probably deal with most, 

is small employers.

Ms. MILLENDER-MCDONALD. But, Mr. Foulke, you spoke to the 

whole notion that before we even engage in health fitness that we 

need to look at health benefits, because that is the really driving 

issue here with small businesses. They cannot afford health benefits. 

And so my question to you is, how many of you give health benefits to your employees?

Mr. BRINSON. Could I address this? I am active as I mentioned 

before in selling corporate fitness memberships. I am also a memVerDate 0ct 09 2002 22:49 Jun 08, 2005 Jkt 000000 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 G:\HEARINGS\96504.TXT MIKE
16

ber of the NFIB, and I have been involved with small businesses 

for 30 years. 

I do have 300 employees myself, but I am still a small business. 

We are privately owned. What we see is that the cost of subsidizing 

fitness really depends on what the employer wants to spend, and 

it does not have to be large at all. 

I tell my corporate prospects that they can contribute whatever they want to. There is no price tag. It could be as high as $150, 

which apparently David’s business is spending to subsidize memberships, or it could be as little as only five or ten dollars a month. 

The average fitness club membership I believe in the country averages, depending on what it offers, somewhere between $40 and 

$50 a month, the average. So if the employer contributes only a little bit, as little as maybe $10 or $12 a month, it provides a tremendous incentive for the employees to pay the balance.

Ms. MILLENDER-MCDONALD. Are we talking about health related 

benefits, or are you talking about for fitness?

Mr. BRINSON. Fitness benefits, and they are linked as you mentioned before, and fitness and health are linked. If your question 

has to do with our we providing health insurance benefits, my business does. 

I believe that most small businesses do provide some kind of support. We provide 80 percent of the cost of health insurance for our 

employees.

Ms. MILLENDER-MCDONALD. Anyone else want to weigh in on 

this?

Mr. MCCARTHY. May I add one point? We have 63 employees, and we provide $350 per year toward a fitness membership anywhere, whether it is a YMCA, a Jewish Community Center, a corporate fitness center. 

And we find that almost all of our employees take advantage of 

it, and as a result our sick days, our productivity, is very much at 

the very low end of the average. 

So we find it enormously valuable, even though we have to submit for every one of those employees a 1099 that shows that that 

benefit was a taxable benefit.

Ms. MILLENDER-MCDONALD. And I am not arguing the fact that 

health fitness is not critical to the well-being of anyone. I walk myself or go to the gym, but to bring this into a bill, this is why H.R. 

1818 is stuck in the Ways and Means Committee that was introduced last year by the Chairman, is because—and there is no action on it. 

And it is because we are looking at how we can have some of the 

most critical issues facing employees in small businesses like child 

care services. Do either of you provide child care services? 

These are the services that are going to be critically needed for 

this new workforce that will be coming into gear over the next decade. You will have more women, more mothers, more single parents. 

17

And so those are some of the critical areas that we will need to 

see in terms of employees having benefits, and benefits that will 

help them to continue to have the morale that is needed in any employment. 

I see that my time is up, Mr. Chairman. I wish you would do like 

other Committees that I serve on that we just go round-robin, and 

let us extend these questions, because this is an important issue. 

But I will wait my turn for the next go-around

Chairman TOOMEY. Well, as you know, I generally do that, and 

I am more than happy to yield additional time to the ranking member if she would like that. Do you want to pursue that now?

Ms. MILLENDER-MCDONALD. Yes, I would like to just raise a couple of questions. Thank you so much, Mr. Chairman. Mr. McCarthy, what is the average wage for small business employees in your 

business? 

Now, I notice that you have a health club, Health Racquet and 

Sports Club business. What type of wages are paid to them, and 

how would this bill, H.R. 1818 level the playing field between your 

business and any other business with reference to what the content 

of this bill speaks to?

Mr. MCCARTHY. Well, I am not sure if I am answering your question directly, but the beauty of this bill is that it applies to all fitness centers, whether they be YMCAs, Jewish Community Centers, 

or community fitness centers. 

And so it applies to all employees at all fitness centers, and so 

we think it provides a benefit, and it is not a mandate for employers or for anybody.

Ms. MILLENDER-MCDONALD. But if I am not mistaken, the employee would buy into this fitness club, or the employer will provide 

the fee for the employee to go this fitness club. Which one is it?

Mr. MCCARTHY. Well, Mr. Brinson had it exactly right. What 

typically happens is that the employer provides partial subsidies. 

So it probably reduces the out-of-pocket costs for the employee from 

maybe $45 a month to $15 a month, which brings that within the 

reach of almost every employee.

Ms. MILLENDER-MCDONALD. Well, that might be a little presumptuous on all of our parts to say that, because in looking at a 

lot of the employees whom I have seen, even $15 is a stretch for 

them to pay for something that they perceive a luxury, even though 

they might have Diabetes II. 

I mean, it is amazing. There is a culture here that we are talking 

about and this culture will not dictate employees buying into a 

health fitness program when they can barely provide the bread and 

butter on the table. 

So that is why I was asking about the wages of those who work 

in your business as to whether or not they would engage in this 

fitness program that you would offer, even though you would pay 

a percentage of that. Mr. Brinson.

18

Mr. BRINSON. If I could, I am looking at this from both ends. I 

am a small business owner. By the way, none of our employees 

earn the minimum wage. All of our employees earn more than the 

minimum wage. 

And then looking at it from the point of view of employers who 

are trying to get their workforce to be more productive, and to get 

fit, the amount that they contribute is totally up to them. 

I have corporate clients who pay the entire costs of a fitness club 

membership. So it costs the employees nothing, and the cost is 

minuscule compared to health insurance. For example, we have a 

company that is subsidizing memberships for all of its employees, 

every single one of them. 

And these memberships would cost $55 a month, and the company is paying the entire cost. That seems like perhaps a lot of 

money, and I do hear what you are saying about maybe the employer should take that money instead and provide child care.

Ms. MILLENDER-MCDONALD. Or health care.

Mr. BRINSON. Well, they do. The employers do all across the 

board support health care, but the cost of subsidizing fitness can 

be very, very small. It is totally up to the employer. 

So I don’t see it as a hindrance. I don’t see it as taking money 

away from anything, and I would like to address also the cost to 

the Internal Revenue Service. Because of the disincentive right 

now for companies to subsidize fitness, very few companies are subsidizing fitness, and very few 1099s are finding their way to the 

IRS. 

So the cost to the government for H.R. 1818 is minuscule or 

nothing, because it just is not happening. So I guess what I am 

saying, Congressman, is that this program will not be a disincentive for employers to do anything else—provide health insurance or 

provide child care, and all of those other things that are so important. 

It will instead make it a very, very simple thing for them to look 

at. Right now they have to look beyond the pure costs that they 

may be willing to pay because of the disincentive. 

Once they hear the word 1099 for their employees, they are 

turned off.

Ms. MILLENDER-MCDONALD. I tend to agree more with that in 

terms of the forms and all that one has to fill out for that. Mr. 

Foulke, you mentioned that workers’ injuries will be much sooner 

than those of their parents and those who have gone before them 

in terms of workers. 

And I could not agree with you more given the fact that people 

do not have health insurance, and so the likelihood of their coming 

to the workforce, well and able to work, is going to be slightly less 

than those who went before them. 

What statistics have you shown where most of your small businesses that have employees under 100 can afford health insurance?

19

Mr. FOULKE. I don’t have any specific statistics here, but I was 

very happy to hear about your involvement in your previous work 

as a health care or human resource professional. 

And I think you have kind of already realized—and I am going 

to address one of your concerns that you mentioned a little bit earlier. I think you realize that with respect to where we are as employers, and especially small businesses being competitive, obviously that is the key that we have to have here, because if we are 

not competitive, there are no jobs and there is no business, especially for the small business, and I appreciate your concern about 

that. 

And I think probably as you have been an HR professional, you 

are aware with respect to productivity and quality that any gains 

we are going to get are going to be very minuscule from that, because most businesses have pretty much gone—you know, they 

have done the Sic Sigma, and they have done Just in Time, and 

they have done the quality circles, and they have done all these 

issues. 

So that area is pretty much set aside. So the only large area left 

of expense to employers is in the health care area, or just in the 

whole area of health and safety if you would like, because the more 

injuries we have, the less likelihood that we are going to be able 

to be competitive because the costs are just going to continue to 

rise. 

And with respect to the workforce that is coming in, clearly they 

are going to be less healthy, and that is kind of what we are talking about here. So the question is where are we going to spend the 

money. 

And I think that is your concern, and to me it seems like that 

we have got to look at, if we don’t spend it on trying to get a 

healthier workforce, and reducing our health care costs, and reducing our workers compensation costs, then it doesn’t matter if we 

have child care to tell you the truth, because the jobs are just not 

going to be there unfortunately.

Ms. MILLENDER-MCDONALD. Well, that is very true, and that is 

very true. Mr. Chairman, I will stop and allow other members to 

speak and I will come back when the time is appropriate.

Chairman TOOMEY. All right. I will yield to the gentleman from 

Ohio.

Mr. CHABOT. I thank the Chairman for yielding, and I want to 

commend him for holding this hearing, and I apologize for being a 

little late myself. As you are probably aware, many of us here have 

commitments all over the place, and you get to meetings as you are 

able to. 

But this has been very interesting and I would like very much 

to look into this legislation, and I have my staffer here, and so 

whereas my philosophy is that we need to simplify the tax code, 

and I would like to get rid of the whole thing and come back with 

something much fairer and flatter, and simpler, until such time as 

we are able to accomplish that, I think pieces of legislation like this 

make a lot of sense. 

20

And members of the House and the Senate have access to a gym, 

and some of us take advantage of it, and too many of us don’t. But 

it seems to me that it makes a lot of sense, a lot more sense to encourage the public to maintain a healthy level of physical fitness 

and too many obviously don’t at the present time. 

It seems like some think that it might be better to sue McDonalds, or Burger Chef, or others, but I think rather than do that—

and we are looking at legislation to prevent that sort of abuse of 

the judicial system. 

It seems like this type of bill makes an awful lot of sense. A lot 

of questions have been asked and some prior to my getting here, 

and are there any issues that any of you on the panel would like 

to expound upon that you did not have an opportunity to? Yes?

Mr. BRINSON. If I could just briefly, very, very briefly. Fitness 

centers are very expensive to build and operate. They are very expensive to build and operate, and a company cannot do it unless 

it is economically feasible for a company to have its own fitness 

center, unless it has by my estimate about 2,000 employees on-site. 

Otherwise, it is just a big waste of money to try to build a fitness 

center. It is much better for the employer to make a deal with the 

surrounding fitness clubs and YMCAs, and whatever, to contribute 

toward memberships for the employees. 

And then the employees can pick whatever fitness center they 

want to go to and pay. Most of them pay half or more than half 

of the costs themselves, the employees. The best way to reach the 

most employees is to reach the employees of small business and the 

best way to do that is to encourage these businesses to subsidize 

fitness benefits for their employees.

Mr. CHABOT. Thank you. I think the gentleman next to you had 

a point.

Mr. FEHRMANN. Thank you, sir. Our company is developing 

plans, compensation packages, for our employees that are competitive, and when the need for child care, or any other benefit is presented in such a way that many of the employers are moving that 

direction, our company will do that also. 

Right now we are focused on some major expenses, and that is 

the cost of providing health care insurance, and we offer health 

care insurance to all of our full-time employees. By the way, approximately 50 percent of our employees are of the minority classes. 

And 80 percent of those employees actively participate in health 

care insurance. The cost of that to our company is somewhere between $6 thousand and $8 thousand per employee, and that is a 

huge expense that is growing quite rapidly. 

And we are very supportive of this bill and any activity that 

would encourage employees to become more physically fit to help 

control the rapid escalation of that cost. 

And so that is what I wanted to speak about and encourage you 

to do what you can to move this forward, and provide some incentive to the employer to continue to provide the benefit like health 

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selves to address some of the health problems and help us control 

these costs.

Ms. MILLENDER-MCDONALD. Would the gentleman yield?

Mr. CHABOT. I would be happy to yield.

Ms. MILLENDER-MCDONALD. Thank you so much. Sir, do you 

want to say something, Mr. McCarthy, before I just speak to this?

Mr. MCCARTHY. I would like to add one point if I may; that our 

63 employees, that the vast majority are women, and we are proud 

that we have a very diversified employee staff, in terms of all 

races, ethnic groups, et cetera. 

And I can tell you that the minority members, whether they be 

women or others, are as eager about this particular benefit as anybody else. So I find this benefit that we are talking about to be attractive to all the entire population, and it does not segment in any 

particular way. 

And I think what Mr. Fehrmann said, I am just backing up what 

he said on that.

Ms. MILLENDER-MCDONALD. And I could not agree with you 

more.

Mr. CHABOT. Mr. Chairman, my time has expired, but I would 

like to ask for an additional two minutes so that I can yield to the 

gentle lady.

Ms. MILLENDER-MCDONALD. My dear friend, I thank you so 

much, the distinguished gentleman.

Chairman TOOMEY. I will yield an additional two minutes to the 

gentleman from Ohio.

Mr. CHABOT. Thank you.

Ms. MILLENDER-MCDONALD. Thank you so much, Mr. Chairman. 

I just wanted to get back to what Mr. Fehrmann said. You are 

right. We know the cost of health insurance to businesses. 

I don’t mind at all looking at and have provided, and have introduced legislation for tax incentives and tax credits for businesses 

that are having difficulty with health insurance. It is skyrocketing, 

and it is very true. 

It is also true that people should invest more into health fitness, 

but that is a culture that we have got to change here in America, 

and it is not going to be overnight, and it is not going to be in my 

opinion through legislation. 

It is just going to be through the myriad of advocacy programs 

that are out there encouraging that. But I just wanted to say that 

we sympathize with small businesses. This Chairman and I are on 

the same page in trying to help small businesses as much as we 

can with the relief that you have in health insurance. 

22

Now, that I can look into full-pledged, in terms of tax incentives. 

Thank you, Mr. Chairman.

Mr. CHABOT. I yield back.

Chairman TOOMEY. Thank you, and I will begin the second round 

of questions by yielding to myself five minutes. First, let me say 

that my take on where this legislation is, it is under the jurisdiction of the Ways and Means Committee obviously because it 

changes the tax code. 

My view on this, and I would think that there are many colleagues in the House that would share this view is that this is simply one of many good ideas. There are many things that I would 

like to see us do with this tax code. 

I would like to eliminate the death tax permanently, and I would 

like to further lower marginal tax rates, and I would like to dramatically simplify the code. Personally, I have my own, many 

things that I would like to accomplish. 

Most of us in this chamber and in the other body have their 

ideas. It is my hope because I think that this is a particularly meritorious idea, that it will be included in the mix at some point when 

we have an opportunity to consider additional tax legislation and 

that is why I think it is important that it be introduced, and that 

we grow the number of co-sponsors, and that we have this hearing 

today, and I am very grateful to all of you for helping this cause. 

The other point that I would like to make pursuant to the discussion that we have been having is that I personally do not see this 

as conflicting with a company’s ability to provide other kinds of 

compensation or benefits. 

I think it is worth keeping in mind, for instance, with regard to 

health care that employers that provide health care to their workers find that their workers are not required to pay tax on that benefit. All we are really asking for is the same treatment for this kind 

of health care, a preventive kind. 

But very much a kind of health care. So in many ways I think 

this could be construed as a broadening of an existing tax treatment of health care, and an appropriate one at that. 

I would like to ask a question to—I think Mr. Brinson had in his 

written testimony addressed this, and I am wondering if any of you 

have similar or different opinions. 

And that is, is there a way to quantify or estimate any kind of 

percentage increase or numerical increase in the usage of health 

care facilities if we were to provide this change in the tax code? 

Do we have any guess as to what kind of numbers we would see 

people actually taking advantage of it?

Mr. BRINSON. If I may, in Northeastern Pennsylvania, we have 

a very low market penetration by fitness club memberships, about 

six percent. The national average is about 13 percent. 

So we can assume that for the general population the penetration is about six percent. It is my experience with companies that 

I do business with, and who subsidize fitness benefits, that as 

many as 20 or 25 percent of the employees participate. 

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So we are looking at 4 to 5 times more participation simply because the employer is supporting fitness. And by the way, I have 

heard it said that this H.R. 1818 is an incentive program, but it 

really is not. 

It is removing a disincentive, because what we have right now 

in the tax code is a disincentive to fitness, a disincentive. So we 

are not giving anything to anyone here. We are simply asking that 

there be fair treatment for all, and it is not going to cost the Ways 

and Means Committee any money. 

Because very few employers are doing this, and I am telling you 

that it is very, very difficult—

Ms. MILLENDER-MCDONALD. Tell that to Mr. Thomas.

Chairman TOOMEY. I have only a minute-and-a-half left in this 

time round, and so I would like to just if I could switch to another 

topic, which is the fact that this benefit, to the extent that it is provided to an employee, and deemed to be taxable income at the Federal level, of course many States have an income tax as well. 

And are any of you aware of any efforts at the State level to exclude this benefit from the taxable income at the State level? Is 

there any movement in that direction?

Mr. MCCARTHY. I wish I could speak more specifically, but I am 

aware that there are some States that are trying to incentivize fitness participation. I can’t give you chapter and verse on that, Mr. 

Chairman.

Chairman TOOMEY. Okay. Does anybody else have any input on 

the State practices? Okay. Well, obviously the Federal Government 

has a much higher income tax burden than any of the States, and 

so the biggest impact by far would be if we made the change, and 

if States chose to follow suit, so much the better. 

But with that, I would be happy to yield five minutes to the 

ranking member.

Ms. MILLENDER-MCDONALD. Thank you, Mr. Chairman. Ms. Silberman, you stated in your testimony that the NCPAA strongly believes in tax incentives as a way to encourage physical activity. 

Would the NCPPA support an individual tax refund rather than 

business tax expenses, as proposed in H.R. 1818?

Ms. SILBERMAN. We advocate on actually a lot of different issues 

around physical activity, and if it was something that we felt like 

would encourage people to be physically active, it is something that 

we would support. This is one of many ways that we want to get 

people more active. 

And one of the things that we work on is making sure that people can be active across the board, and I think we have touched on 

some of the things here in the hearing in terms of not everybody 

is going to join either a public or private health club, or YMCA, or 

JCC. 

24

Some people are just going to walk in their neighborhood. Some 

employers are going to take advantage of this if they have the 

money and they want to, and some won’t. 

But again we feel like we are taking away a barrier, and it is 

just one more thing that we can do to say to people that this is important. It is important to take care of your health and to practice 

prevention. This is one way to get that done.

Ms. MILLENDER-MCDONALD. In speaking to a lot of members on 

this bill, about this bill, they find that this has been a luxury that 

one should have if one wants it, and this is why perhaps the individual tax credit or incentive would be more of an avenue that they 

could engage in dialogue on, as opposed to a business tax. 

And that is why I brought that forward because you had mentioned that. So it is very encouraging to know that you would consider an individual tax incentive because of your whole notion of 

physical fitness. 

One of the major contributors to the development of chronic diseases in obesity is attributable to poor diets, and we know that. 

Now, H.R. 1818 addresses just half of that problem. What changes 

would you like to make in WHIP to improve the diet issue that is 

not included here?

Ms. SILBERMAN. NCPPA has made a very strategic decision actually not to be involved in the diet fight of things. There is a lot of 

politics involved around anything having to do with the food, and 

NCPPA is specifically focused on the physical activities. 

As I like to say, there are not any people who are against being 

physically active, but there certainly are a lot of people who have 

particular ideas around what good nutrition is. So I would respectfully decline to respond.

Mr. BRINSON. If I may.

Ms. MILLENDER-MCDONALD. Mr. Brinson, yes.

Mr. BRINSON. Thank you, Madam. In the fitness industry, the fitness club industry, most clubs provide nutritional counseling and 

diet advice for their members. We do. It is included with the membership’s free of charge, so that we are addressing the diet and nutrition problems, which are huge as you say. 

It is a combination of things and it is not just physical inactivity. 

It is poor diet and we do address that, and I believe that John 

McCarthy could attest to the fact that of our 4,500 U.S. members 

in his association, almost all of these organizations provide free nutritional counseling. 

We have two registered dieticians on our staff to help with this. 

Thank you.

Ms. MILLENDER-MCDONALD. Mr. Brinson, as well as Mr. McCarthy, both of your organizations title or names are—is it Lehigh Valley Racquet and Fitness Centers?

Mr. BRINSON. Yes.

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Ms. MILLENDER-MCDONALD. And, Mr. McCarthy, yours is International Health, Racquet and Sports Club Association. Would you 

not say that that is more geared for an affluent type of person, as 

opposed to any commoner like in my district, the Watts for heaven’s sake?

Mr. BRINSON. Absolutely not. Our members range from very low 

wage workers all the way to wealthy lawyers. We are trying to get 

rid of the lawyers.

Ms. MILLENDER-MCDONALD. Be careful now.

Mr. BRINSON. But, no, Madam. You would be surprised that in 

most fitness clubs, the members of fitness clubs range all over the 

economic scale, and everyone is welcome. These benefits don’t really cost a lot of money. 

I mean, you can get a good fitness club membership for less than 

cable television.

Ms. MILLENDER-MCDONALD. I know that I paid nearly a thousand dollars for fitness programs.

Mr. BRINSON. Well, you may be going to a really upscale club, 

but there are plenty of just nice average clubs for nice average people. That is what we have.

Ms. MILLENDER-MCDONALD. Mr. McCarthy, why don’t you speak 

to this.

Mr. MCCARTHY. Well, I just concur with Mr. Brinson on this, and 

the beauty of this industry as many industries, as the restaurant 

industry, and the hotel industry, is that there really is a facility 

for every pocketbook. 

And we are privileged in this endeavor to be affiliated with the 

YMCA and with other groups such as the YMCA that basically say 

that no one will ever be forbidden membership by reason of financial need. 

In many, many facilities like Mr. Brinson’s, they provide scholarships to people on an as-needed basis.

Ms. MILLENDER-MCDONALD. But the YMCA is a public—

Mr. MCCARTHY. But they are allied with us in this initiative. 

And they are not exactly public. They are public-private.

Ms. MILLENDER-MCDONALD. Public-private, yes. Mr. Foulke.

Mr. FOULKE. Well, as to the lawyer bashing, but I will leave that 

for later.

Ms. MILLENDER-MCDONALD. That is right. Take them outside.

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Mr. FOULKE. But I would like to address one of the points that 

you brought up. You were obviously concerned about where the tax 

credits should go.

Ms. MILLENDER-MCDONALD. Yes.

Mr. FOULKE. And I understand what you are saying with the individual tax credits, but I think the benefit is going to the company, because if you look at insurance companies, they will generally give lower rates for companies that have health fitness benefits that they are providing their employees. Or if they have smoking cessation things. They look at all those areas. I think that this 

goes to the focus that you really want. You are going to have the 

best health care that an employer can provide for its employees. If 

we can reduce the premiums by providing these things, the incentives to the employers, that they provide these fitness programs, 

then they are going to be able to provide more health care for their 

employees overall.

Ms. MILLENDER-MCDONALD. And I think that is a valid argument, provided that this would be just for the small businesses, but 

this will go across the board.

Chairman TOOMEY. Will the gentlelady yield?

Ms. MILLENDER-MCDONALD. Yes, please.

Chairman TOOMEY. I just want to state, unless there is any confusion, just make it very, very clear. What this legislation does is 

nothing for any employer.

Ms. MILLENDER-MCDONALD. That is correct.

Chairman TOOMEY. This is exclusively for the individual. This 

bill simply says that if your employer chooses to provide this benefit, you would no longer have to pay personal income tax on the 

value of that benefit. 

So this is entirely about making it more appealing and more viable for individuals to be able to take advantage of what an employer may choose to provide. I just want to make it very clear.

Mr. FOULKE. Well, I think it does provide an incentive for employers.

Chairman TOOMEY. That fact creates an incentive for employers, 

but there is no tax incentive provided to any employer under this 

for any corporation large or small under this legislation. That is a 

fact.

Ms. MILLENDER-MCDONALD. Well, one more question to Mr. 

Brinson. You did mention and talk about taxes. You mentioned 

that the loss of tax revenues from H.R. 1818, which there is going 

to be a tax loss revenue here, unless we looked at this incorrectly, 

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and I will be happy to go back and look at it, but it would cost the 

government nothing is what you said. 

Now, will you explain that to me how you arrived at that determination given that this is not the determination that we have arrived at?

Mr. BRINSON. Alright. Let me try. Right now the rule is that the 

employer, if the employer subsidizes the benefit, the employer 

should be given a 1099. Some organizations, such as John 

McCarthy’s organization, gives 1099s to its employees. 

There aren’t many companies doing this, and not many companies are subsidizing memberships for their employees because of 

this disincentive. It is just not happening. So that we are talking 

about a minuscule—I said minuscule or nothing. 

I believe that the increase in productivity will create more productive companies and will pay more in corporate income tax, but 

you are not going to lose a lot of money or any money at all to 

speak of because of changing this rule, because employers are not 

doing what they want to do.

Ms. MILLENDER-MCDONALD. Well, I was just reading here, and 

the Chairman has kind of peaked my interest again or concerns 

here. I was reading that this legislation, while it is in the Ways 

and Means, would amend the Internal Revenue Code to extend 

non-taxable fringe benefit coverage to qualifying off-premises fitness centers or athletic club services provided for by the employer. 

Yet he is saying that this bill does not indicate that it is the employer that is—

Chairman TOOMEY. Again, if I could respond, you have correctly 

described the bill and I would still maintain that there is no 

change whatsoever in an employer’s corporate tax return. For instance, the total tax liability of a company would not be changed 

by this legislation. 

What would change is the fact that the worker who gets this benefit would no longer have to declare this income and pay personal 

income tax on the value of this benefit. And if anyone disputes this, 

please join me, but—

Ms. MILLENDER-MCDONALD. And then that would be the loss of 

the taxes then and the worker’s tax assessment.

Chairman TOOMEY. And that is why Mr. Brinson observes that 

it would be very, very small, because very, very few employees currently have this benefit. Now, you could speculate that many more 

corporations would choose to participate in such a program, and 

they would divert some of their pre-tax profits to providing this 

benefit. So that would then be an expense of the company and diminish their profits, and very slightly diminish the total tax that 

would be taken in that fashion. 

However, as Mr. Brinson observes, that is also extremely modest 

and increases in productivity at the company and worker performance, and morale, and many other factors would presumably offset 

that as well. 

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I want to reiterate that this is directly targeted for individuals 

and really does not change tax law regarding corporations.

Ms. MILLENDER-MCDONALD. I don’t want to prolong this any further, and this has been an absolutely and very provocative, and interesting topic to discuss in the meeting. I thank this Chairman 

who was so innovative in and of himself bringing these types of 

things to our Committee. I really do thank him for his leadership. 

So, Mr. Brinson, I think we would be here all day with your 

questions, and so I am going to turn it back over to the Chairman 

and then you can talk with him.

Chairman TOOMEY. Well, I thank the gentlelady, and I appreciate this discussion. I think it was a thorough examination of the 

ideas, and the merits of the legislation, and I hope that we have 

advanced the ball a little bit today, and again I want to thank all 

the witnesses for coming today, and thank the ranking member as 

well. The hearing is adjourned. 

[Whereupon, at 11:34 a.m., the Subcommittee meeting was adjourned.]

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