Benefits Genius
Expert guidance for finance leaders

Cut Payroll Taxes
by Up to 7.65%
On Every Pre-Tax Dollar

This is not a gimmick. It is Section 125 of the IRS tax code. Let us talk about real numbers.

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IRS Authority

Section 125 Cafeteria Plans: The Numbers

26 U.S.C. § 125

Cafeteria Plan Qualification. The definitive IRS statute authorizing employee pre-tax benefit elections.

View Statute

7.65% FICA Savings

Current employer-side Social Security and Medicare combined tax rate. Source: Social Security Administration.

View COLA Rates

Savings Scenarios

Estimated Annual Employer FICA Savings

50 Employees

$36,750

Annual employer FICA savings on pre-tax health insurance deductions

Based on average salary $45,000 and 75% participation rate

200 Employees

$147,000

Annual employer FICA savings on pre-tax health insurance deductions

Based on average salary $50,000 and 75% participation rate

500 Employees

$367,500

Annual employer FICA savings on pre-tax health insurance deductions

Based on average salary $52,000 and 75% participation rate

Process

How Section 125 Works

1

Set Up Section 125 Plan

Establish your plan document with approved deductions for health insurance premiums.

2

Employees Elect Pre-Tax

Employees choose to pay insurance premiums with pre-tax salary deductions.

3

Both Sides Save on FICA

Lower taxable wages reduce FICA taxes for employer and employee.

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Compliance

CFO Questions Answered

Is This Legal?

Yes. Section 125 of the Internal Revenue Code explicitly authorizes cafeteria plans that allow employees to make pre-tax benefit elections. This is one of the most established tax-advantaged benefit structures in existence.

IRS-approved and widely used

What is the Compliance Risk?

Compliance risk is minimal when you have a proper plan document and follow IRS requirements. Most risk comes from improper plan administration, not the structure itself. We handle documentation and ongoing compliance.

Proper setup = minimal risk

What Does Implementation Cost?

Implementation costs typically range from $0-500 depending on your current systems and level of customization. There are no ongoing licensing fees for the Section 125 structure itself.

Low implementation cost

Get expert guidance on Section 125 implementation

A licensed professional who understands the financial impact can help you implement Section 125 quickly and compliantly.

Talk to David

Educational 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.

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