Your benefits already lower your payroll taxes.
When employees pay premiums and HSA or FSA contributions before tax, you skip 7.65% employer FICA on those dollars, and they take home more. We set up the plan and run it in payroll.
One paycheck, two ways.
| BIWEEKLY | AFTER-TAX | PRE-TAX |
|---|---|---|
| Gross pay | $2,384.62 | $2,384.62 |
| Pre-tax deductions | $0.00 | −$161.54 |
| Taxable wages | $2,384.62 | $2,223.08 |
| FICA · 7.65% | −$182.42 | −$170.07 |
| Federal income tax · 12% | −$286.15 | −$266.77 |
| After-tax deductions | −$161.54 | $0.00 |
| Take-home | $1,754.50 | $1,786.24 |
Three accounts, one plan document.
- PREMIUM-ONLY PLANPremiums before tax.
Employee shares of medical, dental, and vision premiums come out before FICA and income tax.
- HEALTH SAVINGS ACCOUNTPaired with an HDHP.
Employee-owned, rolls over, and invests. Payroll contributions skip FICA too.
- FLEXIBLE SPENDINGHealth and dependent care.
Pre-tax dollars for copays, prescriptions, and childcare. Annual IRS limits apply.
What the plan saves you in employer FICA each year.
- Premiums before tax135 employees × $250 × 12
- $405,000
- HSA and FSA contributions135 employees × $1,200
- $162,000
Already have a plan? We'll check you're getting all of it.
- 01Plan document. We draft or review your written Section 125 plan.
- 02Pre-tax deductions. Elections become correctly coded payroll deductions.
- 03Nondiscrimination testing. Run annually so the plan stays qualified.
- 04Year-end reporting. W-2 boxes 12 and 14 populated correctly.
Pre-tax premiums, briefly.
Level-funded plans, ICHRAs and open enrollment, worked on your own numbers, in the benefits guides.
- How much does an employee keep?
- Each pre-tax dollar skips the employee's 7.65% FICA and their income tax. A $210 monthly premium share costs an employee in the 22% federal bracket about $148 of take-home pay instead of $210, before any state tax.
- Is a premium-only plan enough?
- A premium-only plan covers premiums and nothing else. Flexible spending accounts and pre-tax HSA contributions need a fuller Section 125 plan that includes them.
- Do we need a plan document?
- Yes. Premiums come out before tax only under a written Section 125 plan, adopted before the first pre-tax deduction.
Flat federal rate for illustration; state income tax not shown. Employer FICA savings apply only to employee contributions made through the plan. For wages above the Social Security wage base, savings are limited to the 1.45% Medicare portion. This is not tax advice. Consult your own tax advisor.