How much can a multi-unit auto operator save with a Section 125 plan?

A 100-employee multi-unit auto operator at $50,000 average wage with $3,500 average pre-tax benefit election saves approximately $26,775 per year in employer FICA payroll tax. The math: $350,000 in pre-tax elections times 7.65% FICA equals $26,775. IRC §3111. Multi-unit operators see multiplied savings across locations.

Do my techs and service staff save money too?

Yes. Every team member avoids 7.65% FICA on their pre-tax elections, plus federal income tax and state income tax in most states. On a $3,500 election, that is roughly $90 more per paycheck in take-home for each tech, with no change to benefits. For a workforce where the dealership across town is always recruiting, this is a real retention lever.

Will my CPA approve a Section 125 plan?

Almost certainly yes. Section 125 is standard payroll and tax practice. Your CPA either already files it for you (if you have any pre-tax deductions today) or works with the TPA who does. David will talk to your accountant directly to walk through the setup.

For multi-unit auto operators: pay less in payroll taxes on the benefits you already offer.

Q: Is Section 125 legal for multi-unit auto operators?

Yes. Section 125 of the Internal Revenue Code (26 U.S.C. §125) has been federal law since 1978. Cafeteria plans are explicitly defined and protected by statute. The law has been amended dozens of times since, never repealed.

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 across your stores — keep techs and advisors without raising bay rate. 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 multi-unit auto service 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 multi-unit auto operators specifically

Multi-unit auto owners feel three pressures most: tech retention versus dealer poaching, manufacturer warranty changes squeezing dealership margins, and parts and labor inflation across every bay. Section 125 hits all three without writing a new check.

Tech retention without raising your bay rate.

When the dealership down the road poaches your top tech with a $2-3/hr offer, $90 more on every paycheck through pre-tax benefits is the counter you can offer without raising your billable bay rate. Same income to them. No margin hit per ticket.

OEM warranty squeeze and parts inflation. Section 125 savings DO scale with that.

You cannot negotiate with the OEM on warranty rates, and parts costs keep climbing. Section 125 is one line item where inflation actually helps you: the more premium your team runs pre-tax, the more 7.65% adds up. Premiums went up roughly 14% in 2025. As your premium dollars climb, your FICA savings climb with them.

One less thing for your service manager to figure out.

David handles the plan document, nondiscrimination testing, payroll integration with ADP / Paychex / your DMS, and IRS compliance filings. You sign off on the math, he sets it up, your CPA reviews. Your service manager stays focused on the floor.

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

David Toves, Licensed Benefits Consultant

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

Keep reading

For auto

Auto Dealership Owners: What Section 125 Does About Turnover

For franchises

Section 125 for Franchise Owners

Guide

How to Reduce Payroll Taxes Legally in 2026

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