How much can a cleaning or service business save with a Section 125 plan?

A 100-crew service business 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. Per-crew savings scale linearly with team size.

Do my crew members save money too?

Yes. Every crew 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 crew member, with no change to benefits. For a workforce where every dollar of take-home matters, this is a real counter-offer to competitors poaching your supervisors.

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 cleaning, landscaping, and service businesses: pay less in payroll taxes on the benefits you already offer.

Q: Is Section 125 legal for cleaning, landscaping, and service businesses?

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 The law has been amended dozens of times since, never repealed.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 your company — retain your hourly crews with tax-efficient benefits. 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 cleaning, landscaping & service 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 cleaning, landscaping, and service businesses specifically

Service business owners feel three pressures most: crew churn for $1/hr more anywhere down the road, weather-dependent revenue swings on top of fixed labor costs, and customer churn that erodes route density. Section 125 hits the first two without writing a new check.

Crew retention without raising your bid rate.

When the cleaning company across town poaches your supervisor with a $1.50/hr offer, $90 more on every paycheck through pre-tax benefits is the counter you can offer without changing your bid rate to the customer. Same income to them. No margin hit to you.

Weather-dependent revenue, fixed labor costs. Section 125 savings are NOT weather-dependent.

Landscaping slows in winter. Pool service slows in winter. Snow removal IS winter. Your revenue swings hard but your benefit costs do not. Section 125 savings hit every paycheck regardless of how routes ran that week. Premiums went up roughly 14% in 2025; as they go up, your FICA savings go up automatically.

One less thing for your operations manager to figure out.

David handles the plan document, nondiscrimination testing, payroll integration with ADP / Paychex / Gusto / route-management software with payroll integration, and IRS compliance filings. You sign off on the math, he sets it up, your CPA reviews. Your ops manager stays focused on routing crews.

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

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