SAVINGS / SECTION 125
PRE-TAX BENEFITS · CAFETERIA PLANS
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.
TRY YOUR OWN NUMBERS
One paycheck, two ways.
FEDERAL TAX BRACKET
| BIWEEKLY | AFTER-TAX | PRE-TAX |
|---|---|---|
| Gross pay | $2,384.62 | $2,384.62 |
| Pre-tax deductions | — | −$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 | — |
| Take-home | $1,754.50 | $1,786.24 |
EMPLOYEE KEEPS
$825 / yr
$31.74 more per paycheck
EMPLOYER SAVES
$321 / yr
$12.36 employer FICA per paycheck
WHAT CAN GO PRE-TAX
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.
HOW WE SET IT UP
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.
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.