Benefits at micro scale: QSEHRA, IRA match, PTO that is real

What you can offer without an HR department

A practice this size does not need a broker, a benefits administrator, or a group health plan to compete for staff. Three vehicles carry most of the weight: a QSEHRA that reimburses individual insurance premiums, a SIMPLE IRA that matches retirement savings, and a paid-time-off policy the practice actually follows. None of the three is legally required at one or two employees — you are choosing them, not complying with a mandate.

The order matters less than the follow-through. A generous-sounding policy that gets waived every time the front desk is short-staffed teaches a new hire not to trust the handbook. Pick fewer benefits and honor every one of them before you add a fourth.

The QSEHRA: reimbursing premiums instead of sponsoring a plan

A QSEHRA (qualified small employer health reimbursement arrangement) lets an employer that does not sponsor a group health plan reimburse employees, tax-free up to an annual cap the IRS resets each year, for individual health insurance premiums and other qualifying medical costs. It is built for exactly this size of employer — the alternative to sponsoring a plan you are too small to administer efficiently.

The mechanics are specific: who counts as an eligible employee, what notice has to go out and when, how the reimbursement cap is set, and how it interacts with any premium tax credit an employee is claiming on the marketplace. Get one of those wrong and the arrangement can lose its tax treatment retroactively. Run the design — not just the decision to offer it — past a benefits administrator or your CPA before the first reimbursement goes out, and confirm the current-year cap before you promise a number to a candidate.

What a QSEHRA buys you that a raise does not: the reimbursement is generally tax-free to the employee and deductible to the practice, where an equivalent raise is taxable income on both sides. That gap is why it out-competes a flat pay bump for the same cash outlay.

A retirement match without 401(k) overhead: the SIMPLE IRA

A SIMPLE IRA is the lowest-administration retirement vehicle available to an employer this size: each eligible employee opens their own IRA, the practice commits to a matching or a fixed contribution formula, and there is no plan document, no annual nondiscrimination testing, and no Form 5500 filing. It is what a solo or two-person practice reaches for before a 401(k) makes sense.

The employer generally chooses between a percentage-of-pay match tied to what each employee defers and a fixed contribution paid to every eligible employee whether or not they defer anything themselves. The IRS resets the exact formula options and the dollar contribution caps most years — confirm the current numbers with your CPA or the SIMPLE IRA provider before you commit to a rate, and budget the match as a real payroll cost, not an afterthought.

A SIMPLE IRA is not a 401(k) with a different name: it caps how much an employee can defer at a lower level, and it does not carry the loan or Roth features some 401(k) plans offer. Treat it as the starter vehicle, not the permanent one — most practices that grow past a handful of staff eventually convert to a 401(k).

PTO that is real, not aspirational

No federal law requires paid time off; the FLSA sets the minimum-wage, overtime, and recordkeeping floor for non-exempt staff, not leave benefits 1Ref 1U.S. Department of Labor (2026).Fair Labor Standards Act.That the FLSA governs minimum wage, overtime, and recordkeeping, not leave benefits — the basis for stating that no federal law requires PTO.. Some states and cities layer on their own paid-sick-leave mandates, so check your state's rule before you draft the policy — but above that floor, PTO at a micro practice is a benefit you are designing, not one the law hands you.

What makes it real instead of aspirational is the coverage plan, not the accrual formula. A one- or two-person front desk has no one to absorb a week off; if the policy does not name who answers phones and confirms appointments while the only other staff member is out, the PTO exists on paper and gets quietly discouraged in practice. Decide before you write the number:

• Who covers the desk when the employee is out — you, a per-diem temp, or a documented closed-office day.
• Whether unused time carries over or pays out, and the cap on either.
• How far in advance a request is due, and what happens to a same-day sick call.

Write the answer into the same document that carries your other policies — even a two-person practice benefits from the ten-page handbook that says these things in writing, rather than relying on a verbal understanding the two of you remember differently six months later.

The legal floor and the walls around it

At one or two employees, most federal anti-discrimination statutes that could otherwise constrain how you design a benefit have not phased in yet — the core Title VII and ADA protections apply at 15 employees, and age discrimination coverage at 20 2Ref 2U.S. Equal Employment Opportunity Commission (2026).Employers.That federal EEO laws phase in by employee count (15+ for Title VII/ADA, 20+ for ADEA), which is why a one- or two-employee practice has broad latitude in how it designs benefits. — so you have real latitude in what you offer and to whom. That latitude has one hard boundary: whatever nondiscrimination rule the specific vehicle itself carries still applies regardless of headcount, and a QSEHRA in particular must be offered to every eligible employee on the same terms.

The wall on the other side is ERISA. The moment you move past a QSEHRA or a SIMPLE IRA and sponsor a traditional group health plan, you take on ERISA's plan-document, disclosure, and claims-appeal framework 3Ref 3U.S. Department of Labor (2026).ERISA.That sponsoring a self-funded group health plan pulls the practice into ERISA's plan-document and claims-appeal framework, in contrast to a QSEHRA or SIMPLE IRA. — real administrative weight that is exactly what the smaller vehicles are built to avoid. If you instead buy a small-group insurance policy rather than reimbursing premiums individually, that market is regulated by your state insurance department, and the NAIC coordinates the model rules most states adapt 4Ref 4National Association of Insurance Commissioners (2026).National Association of Insurance Commissioners.That state insurance departments regulate fully-insured small-group plans, with the NAIC coordinating the model rules states adapt — relevant if buying a group policy instead of reimbursing premiums.; check your own state's rule before you shop it.

How you classified that hire — w-2 vs 1099 for admin work — decides whether either vehicle even applies: both a QSEHRA and a SIMPLE IRA are employee benefits, and a genuine 1099 contractor is not eligible for either.

Sequencing the package as you grow

Most micro practices add these three in roughly the same order: PTO first because it costs nothing to design correctly and does the most for retention, a QSEHRA second once the practice has stable enough revenue to commit to a monthly reimbursement, and a SIMPLE IRA third once payroll is predictable enough to forecast a match. Layering them in that order spreads the administrative lift instead of taking it all on the week you make your first hire.

Budget each one as real overhead at micro scale, not a rounding error — the QSEHRA reimbursement, the SIMPLE IRA match, and the cost of covering PTO all show up in the same monthly number as rent and your EHR subscription, and underestimating them is a common way a first hire's true cost surprises a solo owner. Revisit the package every year rather than setting it once: the IRS caps move, your revenue moves, and what you can afford to offer a second hire is rarely identical to what you offered the first.