Compliance
A fiduciary-driven process. EBA’s framework begins with healthcare access rather than with a targeted tax result — the employee benefit should have legitimate, identifiable value on its own before potential payroll efficiency is considered.
Four Provisions, Working Together
The EBA framework may involve several longstanding provisions of federal tax law. These provisions perform different functions and should be understood together rather than treated as interchangeable.
IRC §125
Cafeteria-plan election framework that may permit eligible employees to elect qualified benefits on a pre-tax basis.
IRC §106(a)
Addresses qualifying employer-provided accident or health coverage.
IRC §213(d)
Provides the federal tax definition used to determine what constitutes medical care.
IRC §105(b)
Addresses qualifying reimbursements of medical-care expenses.
Simplified explanation of the framework — not a legal or tax determination for any individual employer.
Organized Around the Employer’s Actual Facts
EBA’s preferred review process is organized around the employer’s actual facts, not around defending a predetermined conclusion.
| Review Area | Questions to Resolve |
|---|---|
| Workforce | Who is eligible? Who may participate? Are any classes treated differently? |
| Benefit | What medical services are actually provided and under what terms? |
| Plan Documents | Do the written documents accurately describe elections, benefits, reimbursements, limitations, and administration? |
| Tax Treatment | Which exclusions are being relied upon and what conditions must be satisfied? |
| Payroll | How will elections, reimbursements, and applicable reporting appear in payroll? |
| Administration | Who substantiates, maintains records, handles claims or reimbursements, and communicates with employees? |
| Integration | What group-health-plan, ERISA, ACA, HIPAA, nondiscrimination, or other requirements apply? |
| Signature Ready | Have the employer’s attorney, CPA/tax advisor, payroll provider, and benefits advisors received enough information to evaluate the arrangement? |
The Operational Compliance Folder
A service-based plan should have an operational record showing that the medical benefit exists, is available to eligible employees, and is administered according to the governing plan.
- Maintain enrollment and election records
- Document employee eligibility and applicable participation requirements
- Maintain appropriate records supporting medical-care access and reimbursements
- Coordinate privacy practices so employers receive only the information they are permitted and need to administer the plan
- Retain plan, payroll, and administrative records in accordance with applicable requirements
Complete Alignment, End to End
A favorable description in a presentation cannot cure inconsistent operations. The written plan, employee communications, enrollment records, healthcare access, reimbursements, payroll, and administration should operate consistently.
Access to Immediate Benefits at Zero Cost
The EBA model is intended to connect employees with actual healthcare resources. Access should be supported by clear employee communication, enrollment assistance, and an administrative process that demonstrates how the benefit operates.
- Primary care
- Urgent care
- Mental-health services
- Prescription resources
- Specialist resources
- Clinically appropriate health programs
- Care navigation
Specific services, availability, formularies, provider networks, and terms should always be confirmed against the employer’s contracted offering.
Potential Savings, Employer-Specific Analysis
EBA frames payroll savings as potential savings, not guaranteed savings. Results can vary based on employee wages, Social Security wage limits, participation, state and local rules, benefit and program costs, existing benefits, payroll structure, and other facts.
- Use actual census and payroll data whenever possible
- Show assumptions clearly
- Model potential employer payroll-tax impact
- Show program costs and potential net employer impact
- Never present a single savings number as a guaranteed result for every employer
Every Role, Clearly Assigned
Employer
Adopts the plan, oversees payroll and workforce decisions, and fulfills employer responsibilities.
EBA
Coordinates education, analysis, implementation support, and ongoing program assistance within its agreed role.
Plan Administrator / TPA
Performs administrative functions assigned under the governing documents.
Healthcare Vendors
Deliver the contracted medical services.
Actuary / Valuation Professional
Performs any assigned valuation work.
Attorney / Benefits Counsel
Advises on legal and regulatory matters.
CPA / Tax Advisor
Advises on employer-specific tax treatment and reporting.
Payroll Provider
Implements payroll treatment based on approved plan instructions.
Our Role Doesn’t End at Implementation
Our role is not simply to sell a product. Our role is to help employers understand their options, evaluate the economics, implement appropriate solutions, and support those programs after implementation.
Protect the Employer
Structure the program around documented rules and clearly defined responsibilities.
Serve the Employee
Deliver healthcare benefits employees can actually access and use.
Document the Process
Maintain plan documents, eligibility standards, substantiation, payroll records, and administrative records.
Coordinate the Professionals
Keep legal, tax, payroll, healthcare, actuarial, and administrative responsibilities clearly assigned.
Four Standards of a Sustainable Program
Meaningful Benefit
Employees should receive access to healthcare resources capable of providing real value.
Defensible Structure
The written plan and actual administration should support the benefit and tax treatment being relied upon.
Professional Coordination
Legal, tax, actuarial, payroll, healthcare, and administrative responsibilities should be clearly assigned.
Measurable Economics
The employer should understand projected savings, costs, assumptions, and risks before implementation.
Twelve Questions Worth Asking
What problem are we trying to solve for employees?
Every strategy should start with a real employee need, not a tax outcome.
What specific medical benefits will participating employees receive?
Access should be concrete and confirmed against the employer’s contracted offering.
Which employees are eligible and what elections are required?
Eligibility and election requirements should be clearly documented for every class of employee.
How are reimbursements or benefits connected to qualifying medical care?
The connection to actual medical care is what supports the tax treatment being relied upon.
What records substantiate the plan’s operation?
An operational record should show the benefit exists and is actually administered as written.
How was any actuarial or economic valuation developed?
Any valuation work should be performed and documented by an assigned qualified professional.
How does the arrangement coordinate with existing health coverage?
New strategies should be evaluated alongside, not in conflict with, an employer’s current benefits.
What nondiscrimination, ERISA, ACA, HIPAA, and reporting requirements apply?
Applicable regulatory requirements should be identified and addressed before implementation.
How will payroll be configured and tested?
Payroll treatment should be configured, tested, and confirmed with the employer’s payroll provider.
What happens if an employee does not use a particular service during the year?
The program’s design should account for variable utilization, not assume uniform participation.
Which party is responsible for each ongoing administrative function?
Responsibilities should be clearly assigned so nothing falls through the cracks after launch.
Have legal, tax, benefits, and payroll advisors reviewed the complete structure?
The employer’s own professional advisors should review the full structure before it goes live.
Let’s see how much we can increase the cashflow for your organization
A short employer analysis can help determine whether one or more EBA strategies may be worth exploring, using your organization’s own workforce and payroll information.