Small business owners often turn to their CPA first when they have questions about taxes, compensation, and employee benefits. Because healthcare costs continue to rise, many clients are looking for practical ways to provide benefits while controlling expenses.
Although CPAs are not expected to administer employee benefit plans, understanding the available options can help clients make informed decisions and identify opportunities for tax savings.
Below are several employee benefit strategies that CPAs should be familiar with when advising small business clients.
Recommend a Qualified Small Employer HRA (QSEHRA)
Many small employers assume they must either offer a traditional group health plan or provide no healthcare benefit at all.
A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) offers another option.
A QSEHRA allows eligible small employers to reimburse employees for:
- Individual health insurance premiums
- Medicare premiums
- Qualified medical expenses
Because reimbursements are generally tax-free when the applicable requirements are met, a QSEHRA can provide significant value for both employers and employees.
A QSEHRA may be appropriate for clients who:
- Have fewer than 50 full-time equivalent employees.
- Do not offer a group health plan.
- Want predictable healthcare benefit costs.
- Want to help employees purchase their own health insurance.
Consider a Flexible Spending Account (FSA)
A Healthcare Flexible Spending Account allows employees to pay qualified medical expenses using pre-tax payroll deductions.
Although the employee funds the account through salary reductions, employers also benefit.
Potential advantages include:
- Reduced employee taxable income.
- Potential payroll tax savings for the employer.
- A stronger employee benefits package.
- Relatively low administrative costs.
For many small employers, an FSA is one of the simplest tax-advantaged benefits to implement.
Review HSA Eligibility
If a client offers a qualified High Deductible Health Plan (HDHP), employees may be eligible to contribute to a Health Savings Account (HSA).
HSAs provide several tax advantages:
- Tax-deductible contributions.
- Tax-free investment growth.
- Tax-free withdrawals for qualified medical expenses.
Helping clients understand HSA eligibility can improve employee benefits while creating tax-efficient healthcare savings.
Evaluate Whether an ICHRA Is Appropriate
Some employers are moving away from traditional group health plans and instead reimbursing employees for individual health insurance.
An Individual Coverage Health Reimbursement Arrangement (ICHRA) may be appropriate when:
- A client wants predictable healthcare costs.
- The workforce is diverse.
- Employee classifications satisfy applicable ICHRA rules.
- Individual coverage better fits the employer’s goals.
Although an ICHRA is not appropriate for every employer, it is an important option for CPAs to understand.
Help Clients Avoid Costly Compliance Mistakes
One of the most valuable services a CPA provides is helping clients avoid unintended tax consequences.
Common misconceptions include:
- “I’ll just reimburse employees for their health insurance.”
- “I’ll pay executives more through the HRA.”
- “I’ll let employees choose between cash and tax-free reimbursements.”
- “I’ll reimburse Medicare premiums for active employees.”
These seemingly simple ideas often involve federal benefit rules that should be evaluated before implementation.
Helping clients ask the right questions early can prevent costly compliance problems later.
Coordinate With Employee Benefits Professionals
Healthcare benefits involve tax law, employee benefits law, payroll administration, insurance, and compliance.
Rather than trying to solve every issue independently, many CPAs work with specialized benefits administrators when clients need assistance implementing reimbursement arrangements or cafeteria plans.
This collaborative approach helps clients receive accurate guidance while allowing each advisor to focus on their area of expertise.
Why These Strategies Matter
Healthcare benefits are often one of the largest expenses for small businesses.
Helping clients evaluate tax-advantaged benefit programs can:
- Reduce payroll taxes.
- Improve employee recruitment and retention.
- Provide meaningful employee benefits.
- Create predictable healthcare budgets.
- Improve overall tax efficiency.
For many small employers, relatively small changes to their benefits strategy can produce significant long-term value.
How Empower Works With CPAs
Empower partners with CPAs who want to help clients understand employee benefit options without becoming experts in benefit administration.
We help clients implement and administer:
- Qualified Small Employer HRAs (QSEHRAs)
- Individual Coverage HRAs (ICHRAs)
- Healthcare Flexible Spending Accounts (FSAs)
- Dependent Care FSAs
- Health Reimbursement Arrangements (HRAs)
- Section 125 Cafeteria Plans
Our team handles the administration while working alongside CPAs, payroll providers, insurance brokers, and employers.
Partner With Empower
When clients ask questions about healthcare reimbursement arrangements or tax-advantaged employee benefits, having the right resources can make all the difference.
If your clients are exploring alternatives to traditional group health insurance or looking for tax-efficient employee benefit strategies, Empower can help.
Contact us to learn how we work with CPAs to support small businesses with compliant, practical employee benefit solutions.
