How employers benefit from the ESPA.
Three benefits, in the order they matter. First, better access for your team and their families. Second, reduced dependency on your major medical plan over time. Third, payroll tax savings the employer recovers, which typically exceed the cost of plan administration.
The three benefits, in order
Better access for your team
Every enrolled employee, plus the employee’s spouse and dependents, has 24/7 access to virtual urgent care, virtual primary care, mental health support, specialist navigation, and prescription benefits through one employee technology portal. Each enrolled employee also receives an annual comprehensive lab panel and an average of $150 a month toward supplemental insurance benefits. Qualified medical expenses are fully reimbursable under the ESPA, with no insurance billing.
This is what employees see and use. It is the reason engagement and retention improve when the ESPA is in place.
Reduced dependency on your major medical plan
When employees use the ESPA for routine and preventive needs, they rely less on the ER, urgent care, and specialist visits. Each of those visits costs the major medical plan something. Over time, fewer of those visits softens claims pressure at major medical renewal.
The ESPA does not directly lower your major medical premium. What it does is move routine care to a separate, lower-cost path so the major medical plan is used for the things it was designed for: hospitalization, major procedures, and ongoing chronic care.
Payroll tax savings the employer recovers
The Section 125 Cafeteria Plan converts a portion of taxable wages into qualified medical expense reimbursement under the SIMRP. The employer’s FICA tax base shrinks by the converted amount. The payroll tax savings the employer recovers typically exceed the cost of plan administration. The net position averages around $505.20 per employee per year.
What the Section 125 plus SIMRP structure actually is
A Section 125 Cafeteria Plan, sometimes called a Section 125 plan or just a cafeteria plan, has been part of the U.S. tax code since 1978. It lets employees use pre-tax dollars for qualified benefits. A Self-Insured Medical Reimbursement Plan (SIMRP) is an IRS Section 105(b) plan that reimburses qualified medical expenses.
The ESPA pairs these two structures with a preventive health benefits plan. Together, they form three integrated documents that work alongside your major medical plan. The structure is in the tax code. What BizPower Benefits provides is the plan documents, the technology, and the administrative infrastructure that make it simple to put one in place.
What you can expect
From your CPA
Your CPA reviews every plan document during setup. We are happy to schedule a joint call with your CPA before any documents are signed.
From your broker
Your broker keeps the major medical relationship. The ESPA does not require rebidding any line of coverage.
From your HR team
Day-to-day plan administration runs through the employer technology portal. Enrollment, employee data changes, and offboarding flow through one system.
From your employees
Take-home pay does not change. Whole-family access to virtual care and preventive health benefits is set up at enrollment. Most employees use the plan within the first 60 days.
When the ESPA pays for itself
In most cases, the payroll tax savings the employer recovers exceeds the cost of plan administration in the first plan year. Setup takes about 30 days from contract signature to the first payroll cycle reflecting the plan. Most employers see the savings reflected in payroll the month after launch.
Frequently asked questions
The Section 125 mechanism converts a portion of an employee’s taxable wages into qualified medical expense reimbursement under the SIMRP. The employer’s FICA tax base shrinks by the converted amount. The reduction in employer FICA tax owed is the recovered savings.
On average, around $505.20 per employee per year, net of plan administration costs. Actual recovery varies by wage levels and workforce mix; we model the specific number for your census during the evaluation.
Payroll tax savings depend on employee participation in the plan and on your specific payroll structure. We model the savings during the evaluation based on your actual census; in our experience the modeled number is reliable.
There are setup and administration fees, which are paid from the recovered payroll tax savings rather than from new employer dollars. In most cases, the recovered savings exceed those fees from the first plan year onward.
Note: Tax benefits stem from the structure of the Self-Insured Medical Reimbursement Plan, which uses pre-tax funding. Employers benefit from reduced FICA taxes, while employees only realize tax advantages if they actively participate in the plan and earn the reimbursement after-tax. Without participation, any reimbursement becomes taxable, negating the financial benefit.
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