Whether you run a small business or a larger one, having a solid benefits program for employees is essential. A mix of good working conditions, competitive pay, and quality benefits can support your business in nine key ways: 1) attract and retain employees, 2) boost productivity, 3) improve morale, 4) reduce turnover, 5) increase employee engagement, 6) lower stress for employees and their families, 7) promote a healthier workforce, 8) enhance your reputation as an employer, and 9) show employees that you value and care about them.

Here are five must-know tips to help you choose the best employee benefits:

1: Talk with a broker.

You might think buying benefits directly from an insurance company will save you money, but that’s not always true. Using a broker is often the smarter option, especially for employee benefits. Working with a health insurance broker comes with several advantages.

a: Market knowledge and expertise: Running a business comes with plenty of responsibilities, and most owners or managers don’t have the time or desire to become insurance experts. That’s why it’s a smart move to connect with a local licensed insurance professional. They know the market, the insurance companies operating in your area, and the health care providers included in each plan’s network.

b: Time, effort, and cost savings: Researching employee benefits and health insurance options on your own can take a lot of time and be difficult. A better option is to work with a broker. Local brokers understand insurance and know the right questions to ask when comparing plans. They can quickly help you find a plan that fits both your employees’ needs and your organization’s budget.

c: Unbiased advice: A broker helps you narrow down your options to find the best fit for your business and employees.

d: Personalized service: Your broker can provide personalized service for your business. They can also help identify ways to reduce risks and choose plans that offer better value for you, your employees, and your company.

e: Customized coverage: Not every plan type (HMO, PPO, EPO, etc.) works for every business. A broker can help find the best option to meet your business’s needs, as well as the needs of your employees and their families.

f: Accurate policy comparisons: Researching and comparing plans is important, but do you know what to prioritize? A broker can help you find the right plan that fits your needs and your employees’ needs at the best price. They can even provide a side-by-side comparison to make your decision simpler.

g: Product diversity: Brokers work with multiple carriers, giving you and your employees more choices for insurance companies, plan administrators, and plan types. Bundling medical coverage with options like dental, vision, or other plans can also help you save money.

h: Policy and claims support: Your broker is there to help you and your employees with claims and service issues throughout the year. Without a broker, you’ll have to handle these issues on your own.

i: Peace of mind: For many business owners and managers, the biggest advantage of using a broker is peace of mind. With a professional focused on your best interests and ready to handle any questions or issues, you can feel more confident and secure.

2: Ask what medical plans are available?

In today’s world, one size doesn’t fit all. It’s important to have a variety of options for you and your employees to choose from. Everyone is different, and their health care needs will likely vary – both from each other and from your own.

Are you planning to offer HMO, PPO, or EPO health plans? Or will you provide employees with a range of options? Employees generally prefer more choices, but your options might be limited if you stick to a single carrier. Some carriers specialize in HMOs, while others focus on PPOs. Opting for a private exchange could allow you to mix plan types with different deductibles and provider networks.

3: Is your business subject to the ACA Mandate?

The Affordable Care Act (ACA) employer mandate (also known as the employer shared responsibility provisions or “pay or play,”) requires Applicable Large Employers (ALEs) to offer affordable, minimum-value health insurance to at least 95% of full-time employers. If an ALE fails to follow the mandate, it could face ACA penalties. Whether an employer is an ALE is determined annually based on the number of employees during the prior calendar year. (To learn more, visit the IRS web page. The IRS also offers information on calculating “minimum value” and “affordability.”)

4: Ask if ancillary products are available?

While health insurance might be your main concern, it’s also important to consider other types of coverage. A 2024 Benefitfocus report shows that over 75% of employees prefer employers who offer fully or partially funded benefits and allow them to choose the options that suit them best.

With more than one-third of Americans unable to afford a $400 emergency, having access to accident, critical illness, and hospital indemnity insurance can help employees cover unexpected costs and provide added peace of mind.

Even if you can’t contribute to employees’ premiums for supplemental coverage, they’ll still appreciate having access to those options.

5: Consider the tax benefits of group health insurance.

Don’t overlook the tax benefits of contributing to insurance premiums for your employees and their dependents. For most businesses, these premiums are fully deductible as a regular business expense. You can deduct them from both federal and state income taxes.

If you are in a business partnership, part of a Limited Liability Company (LLC), or a shareholder with two percent or more of stock in an S corporation, deductions are a little more complicated. However, there are deductions allowed. You should ask your tax advisor for details.

For your employees, contributions they make toward the cost of their health coverage are not directly deductible on their personal tax returns. However, premiums taken from their paychecks using a Premium Only Plan (POP) reduce their income on a pre-tax basis. Employees end up paying less in federal, state, and local income taxes as well as Social Security and Medicare taxes. The reduced taxes increase their take-home pay. A POP also means lower payroll taxes for your business.

Another potential tax-saving vehicle for your employees is a Flexible Spending Account (FSA). An FSA allows employees to put aside funds on a tax-free basis to pay for their out-of-pocket medical expenses – like copayments, deductibles, and prescription drugs. FSA contributions are deducted pre-tax for employees, so they do not pay taxes on these funds.

Typically, leftover amounts at the end of the benefit year are forfeited. However, you can let employees carry over up to $500 to use within the first 60 days (or more) of the next year.

If you fund a Health Savings Account (HSA) for employees, those contributions are typically tax deductible for your business, too. Annual contributions are set by the IRS. For 2025, HSA contributions were limited to $4,150 for self-only health insurance coverage. The family coverage contribution limit was $8,300. For those ages 55 and older; an additional $1,000 was permitted as a catch-up contribution. Contribution limits for 2025 are slightly higher: $4,300 for self-only coverage and $8,500 for family coverage. The $1,000 catch-up contribution remains the same for those eligible in 2025.

Finding a Health Insurance Broker

Don’t have an employee benefits broker yet? Finding one is easier than you think. Check out the “Find a Broker” page on MyCalChoice.com. Just click “Get Started,” fill out your details, and you’re on your way. It’s quick, simple, and gets you one step closer to the perfect benefits solution.

Disclaimer

Federal and state tax laws are complex and subject to change. We strongly recommend you consult with a tax professional on your specific tax situation. CHOICE Administrators is neither a tax expert nor a financial advisor.