How CPAs Can Rethink Healthcare Planning

There is a familiar scene in The Godfather where Michael Corleone realizes that what seems like a future problem is actually a present one. Healthcare planning in retirement works much the same way. It is often treated as something to deal with later, even though it represents one of the largest and least predictable expenses retirees will face. Fidelity’s long-running estimates routinely point to six-figure lifetime healthcare costs for retirees. Yet most tax planning conversations still focus on income taxes, entity structure, and retirement accumulation. For CPAs advising profitable business owners, healthcare planning is not just a personal finance issue. It is a tax strategy opportunity. 

Why HSAs and 401h Plans Deserve a Closer Look 

Two tools often enter this conversation: the Health Savings Account and the 401h medical benefit account. While both provide tax-advantaged ways to pay for medical expenses, their planning value, contribution capacity, and ideal use cases differ dramatically. Understanding these differences allows CPAs to bring more consultative, high-value ideas to clients and deepen their advisory relationships. 

What Is an HSA 

A Health Savings Account is a personal, tax-advantaged account available to individuals enrolled in a high deductible health plan. 

Key Features 

• Contributions are pre-tax or tax deductible 
• Growth is tax deferred 
• Qualified medical distributions are tax free 
• Funds are individually owned and portable 

For 2025, family contribution limits remain under five figures annually, making HSAs useful but inherently capped tools. Typical family limits are in the range of $8,750 per year. 

Ideal Use Case 

HSAs are well suited for: 

• Individuals and families covering current or near-term medical costs 
• Employees building a modest healthcare reserve 
• Clients who value flexibility and simplicity 

They are excellent foundational tools but limited as a large-scale tax planning strategy for highly profitable business owners. 

What Is a 401h Plan 

A 401h plan is a medical benefit account that can be embedded within a qualified retirement plan, typically alongside a defined benefit or pension structure. It is designed specifically to fund retirement healthcare expenses with pre-tax dollars. 

Key Features 

• Contributions are made with pre-tax business dollars 
• Contributions are deductible to the business 
• Assets grow tax deferred 
• Qualified medical distributions in retirement are tax free 
• Funding levels can be significantly higher than HSAs 

Properly structured, annual contributions can range from tens of thousands to well into six figures. Many designs allow approximately $30,000 to $160,000 or more per year depending on plan structure and demographics. 

Ideal Use Case 

401h arrangements are most effective for: 

• Highly profitable business owners 
• Clients already utilizing defined benefit or cash balance plans 
• Owners seeking large, legitimate deductions 
• Clients focused on long-term tax minimization and wealth building 

In short, this is not an every-taxpayer strategy. It is a targeted tool for the right profile. 

Strategic Comparison HSA vs 401h 

From a CPA’s perspective, the distinction is not which tool is “better,” but which is appropriate for the client’s situation. 

Feature	HSA	401h Plan
Contribution scale	Under five figures annually	Tens of thousands to six figures
Funding source	Individual or payroll	Pre-tax business dollars
Ownership	Individual	Employer sponsored plan
Tax benefit	Triple tax advantage	Business deduction plus tax-free medical
Best suited for	Individuals and employees	Profitable business owners
Complexity	Low	High, specialist required

Contribution Capacity 

HSAs are inherently limited by annual statutory caps. They are helpful but small in scale. 

401h plans can offer materially larger funding capacity, often many multiples of HSA limits. 

Tax Leverage 

HSAs provide strong triple tax benefits, but on relatively small dollars. 

A 401h can pair those same tax characteristics with meaningful business deductions and larger funding levels, creating a more impactful planning lever for high-income owners. 

Planning Depth 

HSAs are simple and accessible. 

401h plans require coordination with actuaries, TPAs, and investment advisors. They must be designed correctly to remain compliant, and specialists are essential to successful implementation and maintenance. 

Why This Matters for CPAs 

Many profitable business owners are already maxing out common strategies. They fund 401ks, implement cash balance plans, and optimize entity structures. Yet healthcare, one of the largest future expenses, is often funded later with after-tax dollars. 

A properly designed 401h arrangement allows business owners to: 

• Convert a future personal expense into a current business deduction 
• Reduce current taxable income 
• Systematically build a dedicated healthcare pool 
• Enhance overall retirement security

For CPAs moving toward advisory models and value-based billing, these strategies shift the conversation from compliance to proactive planning. They also create ongoing touchpoints, since plan design and funding require annual review. 

The Importance of Specialist Collaboration 

401h plans are not DIY strategies. They intersect with: 

• Qualified plan rules 
• Actuarial calculations 
• Nondiscrimination requirements 
• Plan document design 
• Investment management 
• Distribution compliance 

Improper setup can create compliance risks or reduce effectiveness. 

That is why many CPAs partner with specialists focused on advanced retirement and benefit plan design. The CPA remains the client’s primary advisor while leveraging expert resources for technical design and implementation. 

This collaborative model allows CPAs to: 

• Deliver cutting-edge strategies 
• Protect clients from technical missteps 
• Expand advisory revenue opportunities 
• Strengthen client loyalty

The Bottom Line 

HSAs remain valuable tools and should not be ignored. But for the right business owners, they are often just the starting point. A 401h plan, when paired with the appropriate retirement structure, can transform healthcare planning into a meaningful tax and wealth strategy, using pre-tax business dollars today instead of after-tax personal dollars tomorrow.