For hospitality businesses: pay less in payroll taxes on the benefits you already offer.
A 100-employee company saves $26,775 a year through Section 125. Every employee sees up to $90 more per paycheck. Same benefits, same coverage, less out of your pocket.
Math: 100 employees × $3,500 average pre-tax election × 7.65% FICA = $26,775. IRC §3111.
Get your company's number
See what Section 125 saves your operation — keep good staff without raising wages. David reaches out within one business day.
How the math actually works
- 1
Your team picks pre-tax benefits (health premiums, FSA, HSA, supplemental coverage) through a Section 125 plan you already have or we set up.
- 2
Those dollars come out of wages before payroll tax is calculated.
- 3
You and your team both pay 7.65% less in FICA on a smaller wage base. Same benefits land in their pocket. The 7.65% you both used to pay stays in yours.
For a 100-employee hospitality businesses company at $50,000 average wage:
| Without Section 125 | With Section 125 | |
|---|---|---|
| Annual wages | $5,000,000 | $5,000,000 |
| Pre-tax benefit elections | $0 | $350,000 |
| Wages subject to FICA | $5,000,000 | $4,650,000 |
| Employer FICA (7.65%) | $382,500 | $355,725 |
| Your annual savings | - | $26,775 |
Your number depends on headcount, average wage, and election size. Connect with David to get yours.
Why this matters for hospitality businesses specifically
Hospitality owners feel three pressures most: keeping front-of-house and back-of-house staff when turnover is structurally high, paying for health insurance that climbs 10-15% every year, and protecting margins on every cover or room night. Section 125 hits all three without writing a new check.
Crew retention without raising your hourly rate.
When the place down the block poaches your line cook or housekeeper with a $1-2/hr offer, $90 more on every paycheck through pre-tax benefits is the counter you can offer without changing your menu pricing or room rate. Same income to them. No margin hit to you.
Insurance premiums keep climbing. Section 125 savings scale with them.
The more your team runs through pre-tax, the more 7.65% adds up. Group health premiums went up roughly 14% in 2025. As your premium dollars go up, your FICA savings go up. Automatically, no plan change required.
One less thing for your GM to figure out.
David handles the plan document, nondiscrimination testing, payroll integration with ADP / Paychex / Toast / Restaurant365, and IRS compliance filings. You sign off on the math, he sets it up, your CPA reviews. Your GM stays focused on guests.
Is this actually real?
Section 125 sounds too good to be true. It is real. It has been real since 1978.
It is federal law.
Section 125 of the Internal Revenue Code (26 U.S.C. §125) was enacted by the Revenue Act of 1978. Cafeteria plans are explicitly defined and protected by statute. The law has been amended dozens of times since. Never repealed.
The 7.65% is not negotiable.
IRC §3111 sets the employer payroll-tax rate at 7.65% (6.2% Social Security + 1.45% Medicare). Pre-tax elections reduce the wage base. Lower wage base means lower FICA. Arithmetic, not interpretation.
Have your accountant in the room.
Section 125 is standard payroll and tax practice. Your CPA either already files it for you or works with the TPA who does. Bring them into the conversation with David. He will talk to them too.
About David
Licensed Benefits Consultant | Phoenix, AZ
David Toves is a licensed benefits consultant based in Phoenix. He works with HVAC owners, electrical contractors, plumbers, restaurant operators, trucking fleets, and hotel operators across the country to set up Section 125 cafeteria plans, FSAs, HSAs, and supplemental coverage. The closest thing most owners get to a benefits guy who picks up the phone.
Already know you want to talk? Email David directly at dtoves@tovesfinancial.com
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