ESPA compliance, in plain English.

If a payroll-tax-saving plan sounds too good to be true, you are right to ask the question. This page answers it. The Employer Sponsored Preventive Access (ESPA) combines two coordinated medical benefit components: a Component One medical benefit elected through the employer’s Section 125 cafeteria plan, and a separately employer-funded Self-Insured Medical Reimbursement Plan (SIMRP). We will walk you through the structure in plain language. The full technical detail lives on the Compliance page.

The three questions buyers usually ask

How is the ESPA structured?

The ESPA uses two coordinated medical benefit components. An eligible employee’s prospective Section 125 election applies to the Component One medical benefit. Component Two is separately employer funded and administered under the SIMRP. Applicable tax treatment depends on the Plan’s terms and operation. What we provide is the technology and the plan documents that make it simple for an employer to put one in place correctly.

Why have we not heard of this before?

Plans that combine a Section 125 cafeteria plan with a self-insured medical reimbursement plan are well known to ERISA attorneys and benefits consultants, but less familiar to many general-practice CPAs. Arrangements in this category also vary widely in how they are designed and operated, so it is reasonable to ask detailed questions. We encourage you to review the ESPA’s structure with your own advisors.

What is the risk to our business?

The risk of putting any benefits plan in place incorrectly is real. That is the entire reason BizPower Benefits exists. Our plan documents are designed around the ESPA’s two-component structure, and our technology administers the plan according to those documents. Your CPA reviews everything during setup, and our team is available for any outside audit.

The three safeguards built into every ESPA

Is the ESPA legal?

Component One is the medical benefit to which an eligible employee’s prospective Section 125 election applies. Component Two is separately employer funded and administered under the SIMRP. The two are coordinated but not combined.

Participation is a Plan condition

Employees are not required to perform specific monthly activities. Verified medical participation may satisfy a Plan condition, while Component Two reimbursement is separately administered under the SIMRP, subject to Plan terms and applicable limits.

No fixed indemnity products inside the plan

The ESPA does not include fixed indemnity products. Component Two reimbursements are tied to eligible qualifying medical expenses under the SIMRP, not to fixed dollar payments.

Who we work with on compliance

BizPower Benefits coordinates compliance work with:

The next level of detail

If you want the full technical answer, including the applicable Internal Revenue Code sections and regulatory framework, the Compliance page is built for that. If you want to ask a specific compliance question or have us coordinate with your CPA, book a 15-minute evaluation.

Frequently asked questions

Is the ESPA an insurance product?

No. The ESPA is a Section 125 Cafeteria Plan paired with a Self-Insured Medical Reimbursement Plan (SIMRP) and preventive health benefits. It pairs with the employer’s existing major medical plan but is not itself insurance.

Will the IRS audit our business if we put an ESPA in place?

Putting an ESPA in place does not trigger an audit. The plan is structured under named IRS code sections that have been in use for decades. If you are audited for any other reason, the plan documents we provide are designed to be audit-defensible.

What if our CPA has never heard of this?

Many CPAs have not seen this structure before. We are happy to coordinate a joint call with your CPA during setup so they can review the plan documents and ask questions directly.

What happens if an employee changes pay or withholdings mid-year?

Employee data is reassessed regularly. When pay or withholdings change, the plan is updated accordingly. This is one of the reasons employers work with a structured platform rather than building a SIMRP themselves.

BizPower Benefits by BizPower360

Tax Structure Note: ESPA uses two coordinated medical benefit components. An eligible employee’s prospective Section 125 election applies to the Component One medical benefit. Component Two is separately employer funded and administered under the SIMRP. Eligible Component Two reimbursements are determined under the Plan’s eligibility, medical-expense, substantiation, coordination, and reimbursement requirements. Applicable tax treatment depends on the Plan’s terms and operation.