Strategic Tax Efficiency Analysis for Section 125 Implementation
Revenue-neutral benefit restructuring that reduces employer FICA while funding employee wellness through pre-tax payroll structuring
Section 125 Payroll Structuring and Employer FICA Impact
76% of U.S. workers report mental health symptoms. 40% of employee turnover is stress-related. This is a payroll structuring and tax treatment analysis, not a benefits product.
IRS Tax Code Foundation
- • Section 125: Cafeteria plan authority (enacted 1978)
- • Section 105: Medical reimbursement (SIMRP)
- • Section 213(d): Tax-free benefit qualification
- • Section 62(a): Work-related expense deductions
Program Results
- • $773 average employer payroll credit/employee/year
- • 89% employee retention (vs 71% industry avg)
- • 23% reduction in health claims
- • 94% employee approval rating
- • 50-employee company: $38,650 annual credit
How Tax Reallocation Works
Employee funds the employer would withhold for tax are released from tax liability under Section 125. Not employer money. Not new employee deductions.
- • 90% allocated to mental health benefits (IRS compliance)
- • 10% returned to employee paycheck ($35-40/check increase)
- • Employer saves 7.65% FICA on reallocated amount
Implementation Process
Step 1
Submit payroll structure for tax impact analysis.
Step 2
Review compliance docs and projected payroll credit.
Step 3
Seamless onboarding. We handle setup and employee education.
Step 4
Tax reallocation begins. Mental health access activates.
Employer FICA Impact Estimator (Section 125)
Technical walkthrough of payroll flow, compliance framework, and employer FICA impact modeling.
>Section 125 Implementation and Payroll Structuring OverviewSection 125 Implementation and Payroll Structuring Overview
Visual overview. Formal payroll and compliance documentation provided during analysis.
Technical walkthrough of payroll flow, compliance framework, and employer FICA impact modeling.
Frequently Asked Questions
Is this legal and IRS compliant?
Yes. Section 125 Cafeteria Plans are explicitly authorized by the Internal Revenue Code since 1978. This is codified federal tax law, not a loophole. Administered through established provider consortium: Attentive, EmployWell Plus, CP+, Vero.
How does the employer get a payroll credit without paying anything?
The employer's payroll credit comes from FICA tax savings (7.65%) on the amount employees reallocate through Section 125. Money the employer would have paid in payroll taxes is retained as a direct credit.
Example: Employee reallocates $10,000 annually → Employer saves $765 in FICA. Across 50 employees = $38,250 annual payroll credit.
What employee benefits are funded through the Section 125 structure? Benefit access is a secondary outcome of the tax-advantaged payroll structure.
- 6 personal therapy sessions per year ($0 copay)
- 4 couples therapy sessions per year ($0 copay)
- Mayo Clinic mental health programs
- Addiction recovery programs
- Wellness portal (meditation, yoga, nutrition)
- Identity protection for employee + family
Does this replace our existing health insurance?
No. This is a supplemental "second layer" of mental health benefits that operates independently of existing benefit packages. Your current health insurance, dental, vision, and other benefits remain completely unchanged.
What does onboarding look like?
Completely seamless. We handle everything:
- Payroll system integration (no disruption)
- Employee education sessions
- All enrollment and compliance paperwork
- Ongoing employee support
Timeline: 2-3 weeks. Minimal HR involvement—just initial payroll coordination.
Request Tax Impact Analysis
No cost. No obligation. Consult with your tax advisor.