Employers pay FICA tax at 7.65% of taxable salaries. Most are paying that rate on more payroll than they need to — not because of an error, but because a simple, long-established plan was never set up. Section 125 has made this fixable since 1978.
If an organization hasn't done this, the math below is theirs to keep.
No vendors change. Existing health carriers, payroll provider, and benefits stay exactly as-is. A plan document is added. Employees elect to pay certain benefit premiums pre-tax. Taxable payroll shrinks. FICA is calculated on the smaller base. Employer pays less. Every year. Automatically.
Employees benefit too. Each takes home roughly $212 more per month — at no cost to them or the employer.
Any employer with 5 or more full-time W2 employees and an existing health plan — or one looking to establish benefits for the first time. Works across industries including non-profit, government, education, and private sector. S-corp owners and sole proprietors cannot participate themselves, but their employees can, and that's where the savings are.
The calculator shows two effects of a Section 125 plan, all from the same input: headcount. This is not a coincidence — they both flow from the same mechanism.
Adjust the slider. The per-employee assumptions are standard. The math is not complicated, which is part of what makes this interesting.
Cost to the employer: zero.
Setting this up requires a qualified plan administrator — it isn't something an accountant or bookkeeper handles directly. A 15-minute call is all it takes.
If you'd like to explore whether this is appropriate for a client, reach out.