Your Employees Save More.
Your Company Pays Less.
Everyone Wins.
Most owners run benefits on autopilot and leave real money on the table — in payroll tax, in the wrong plan mix, in coverage gaps. We help you see the whole picture: health insurance, pre-tax accounts, supplemental, and the tax rules that quietly decide how much it all costs.
The numbers that actually matter
Not marketing numbers. These are the parts of the tax code that do the work.
Employer-side FICA
What you stop paying on every pre-tax benefit dollar run through Section 125.
Established tax code
Section 125 has been in the IRS code for decades. This is not a loophole.
Different wrapper
Your team keeps the same benefits. The difference is how the dollars are taxed.
The Payroll Tax Most Owners Are Quietly Overpaying
Every dollar your employees spend on health insurance, FSAs, dependent care, and other qualified benefits gets hit with FICA tax — unless a Section 125 plan is in place. A lot of owners assume they have one. Most do not, or only have a bare-minimum version.
✕ Without Section 125
- Employee pays health premiums with after-tax dollars
- Both you and your employee pay FICA (7.65% each) on those dollars
- For 50 employees, that's an estimated $36,000+ per year in unnecessary payroll taxes
✓ With Section 125
- Employee pays health premiums with pre-tax dollars
- Neither party pays FICA on those deductions
- Same benefits, same coverage, structured correctly to reduce taxes
Quick Example: 50 Employees
Average salary of $50,000 with $6,000 in annual pre-tax deductions per employee at 75% participation:
Estimated employer savings/yr
Estimated employee savings/yr
Estimated total tax savings/yr
Based on 7.65% FICA rate. Actual results vary by salary, participation, and plan design.
Section 125: The Legal Tax Advantage Most Small Businesses Miss
It's not a loophole, it's right there in the IRS tax code. Here's what it does for you.
Reduce Payroll Taxes
Skip the 7.65% payroll tax on every dollar your team pays pre-tax for health premiums, FSAs, dependent care, and more. It adds up fast at 25 employees and compounds from there.
Bigger Paychecks, Same Salaries
Your team keeps more of what they earn — no raise on your books, real take-home on theirs. It is one of the only ways to give people more money without changing payroll.
Benefits That Compete
Supplemental coverage — dental, vision, accident, critical illness — is often carrier-paid, which means it costs you nothing to add but reads as a real upgrade in the recruiting conversation.
Compliance, Handled
Plan document, annual fairness testing, IRS paperwork — a third-party administrator runs all of it. Your job is picking which benefits to offer. Ours is making sure you are set up right.
See Your Savings in 30 Seconds
Our free FICA Savings Calculator estimates what your company could save with a Section 125 plan. Enter your employee count and average salary, we do the math.
Open the CalculatorSample estimate. Your results will vary.
Learn More
What Is a Section 125 Plan?
The complete guide to how cafeteria plans work, who qualifies, and what benefits can be included.
Read the Guide
FICA Savings for Employers
A breakdown of how payroll tax savings work, with real numbers for businesses of different sizes.
Learn More
Pre-Tax vs. Post-Tax Benefits
Understand the difference and why it matters for your bottom line and your employees' paychecks.
Learn More
Business owner FAQ
Straight answers to the questions that come up before most owners set up a plan.
How much can a small business save with a Section 125 plan?
An employer saves 7.65% in FICA payroll tax on every dollar an employee runs through a Section 125 plan pre-tax (health premiums, FSA contributions, dependent care). For a 50-person company with an average $6,000 in pre-tax deductions per employee at 75% participation, that is roughly $17,000 per year in employer-side savings alone. Employees also save federal income tax and their own 7.65% FICA on the same dollars.
Do I need a Section 125 plan if I already offer health insurance?
Yes. Offering health insurance is not the same as running the premiums through a Section 125 plan. Without a written Section 125 plan document, any employee premium deductions are technically post-tax, meaning both you and your employees are paying FICA on those dollars. The plan document is the piece that makes the pre-tax treatment valid.
What kinds of benefits can run through a Section 125 plan?
Group health insurance premiums, dental and vision premiums, health FSAs, dependent care FSAs, HSA contributions, and qualifying supplemental coverage can all run pre-tax through a Section 125 plan. A premium-only plan (POP) covers just the group health premium. A full cafeteria plan covers the broader menu.
Does a business owner qualify for their own Section 125 plan?
It depends on how the business is structured. C corporation owners qualify as employees and can participate. S corporation owners with 2% or greater ownership are excluded from Section 125 pre-tax treatment on most benefits. Sole proprietors, partners, and LLC members taxed as partnerships are also excluded. Spouses of S-corp owners can sometimes participate if they are bona fide employees.
How long does it take to set up a Section 125 plan?
The plan document itself can be drafted and executed quickly. The practical timeline to the first payroll run depends on payroll-system configuration and carrier coordination — typically a few weeks when payroll and carrier line up. The plan must be in effect before the first payroll cycle where pre-tax deductions are taken.
Want to see what this looks like for your team?
A free 15-minute call with David Toves, a licensed benefits professional. Bring your headcount and a rough sense of what you offer today. We will walk through the math and flag what is worth changing. No hard sell, ever.
Talk to DavidEducational Content Only: The information provided on benefitsgenius.co is for educational and informational purposes only. It does not constitute insurance, tax, legal, or financial advice. Consult with qualified professionals regarding your specific situation.
Savings Estimates: All savings figures are illustrative and based on general FICA tax rates (7.65%) and assumptions. Actual savings vary based on your organization's size, payroll structure, employee participation rates, plan design, and applicable state/federal regulations. Consult your tax advisor for projections specific to your situation.
Ready to see how much your company could save?
Connect with David Toves for a free, no-obligation consultation — or ask Sarah a quick question anytime.
