Learn About Section 125 Plan FICA Savings
How do Section 125 Plans Effect FICA Taxes and What Are They?
FICA stands for the Federal Insurance Contributions Act, and it includes two big payroll taxes that every employer must match:
Social Security tax (6.2%)
Medicare tax (1.45%)
That’s 7.65% of every employee’s eligible wages—coming directly out of your budget.
If you have 10 employees earning $40,000 each, you’re paying over $30,000 per year in FICA taxes alone.
Now imagine shaving off 7.65% from a portion of that. That’s what Section 125 Plans make possible.
Create Section 125 Plan FICA Savings
When you offer a Section 125 Plan, employees can pay for eligible benefits—like health insurance, dental premiums, vision care, dependent care, and even wellness add-ons—before taxes are calculated.
That means:
Their gross taxable wages go down
You pay FICA on a smaller amount
You save 7.65% on every pre-tax dollar elected
Real-World Example:
15 employees each elect $3,000/year in pre-tax benefits
Total pre-tax payroll = $45,000
Employer FICA savings = $3,442.50
And that’s just one year.
Why Smart Employers Use This 125 Plan Strategy
Section 125 Plans are widely used by employers of all sizes, in every industry—from small construction firms to large healthcare systems. Why? Because it’s one of the only ways to lower tax liability while increasing benefit value.
- Legal and IRS-compliant
- Easy to implement with your current payroll system
- No need to change insurance providers
- Employees take home more money
- You spend less per paycheck
For small businesses, even modest participation delivers a meaningful impact. For larger employers, it’s a no-brainer.
What Can Employees Pay for Pre-Tax with Section 125 Benefits?
FICA savings are generated through every eligible pre-tax benefit. With a properly designed Section 125 Plan, your team can elect pre-tax dollars for:
Health insurance premiums (medical, dental, vision)
Premium Only Plans (POP)
Flexible Spending Accounts (FSA & Dependent Care)
Telemedicine and urgent care access
Mental health support and wellness perks
Identity theft protection and financial wellness tools
Pet care, travel club access, and more—when structured properly
Each pre-tax dollar they elect is a dollar you don’t pay 7.65% on.
Why Section 125 Plans Work So Well
Most tax strategies require lots of planning, long wait periods, or complex legal structuring.
Not this one.
Section 125 Plans:
Are easy to set up
Can integrate with your current payroll provider
Require no change to your health insurance
Provide immediate savings
It’s one of the few tax tools that works fast, works long-term, and boosts employee loyalty at the same time.
Disclaimer: Section 125 Solutions LLC does not offer legal or tax advice. We refer employers to qualified providers for compliant Section 125 Plan setup and management.
Make Section 125 Work for You
You’re already paying FICA taxes. With a Section 125 Plan, you pay less—and your employees get more.
It’s one of the smartest financial moves you can make as a business owner. And with our help, you can launch your plan in just a few days.
- Lower your payroll taxes
- Increase employee retention and satisfaction
- Keep more money in your business—every single month
Start Saving More with Every Paycheck
Want to know what your business could save right now?
- Use our free FICA savings calculator
- Schedule a call to get your custom estimate
- Launch your plan with full compliance and support
FICA savings are waiting—let’s make them yours.
-> Disclaimer: Calculator results are for informational use only and do not guarantee savings. Actual results may vary depending on your specific business, employee participation, and plan structure.
Book Your Consultation
Explore how Section 125 plans could save your business over $1,000 per W-2 employee each year. Book a free consultation to see how much you could be losing by not having one.
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