A Section 125 cafeteria plan is a written plan document that allows Florida small businesses to let employees pay their share of group health insurance premiums with pre-tax dollars. Without a Section 125 plan, employee premium contributions are made after taxes — meaning both the employee and employer pay FICA taxes on those amounts. With a Section 125 plan, both parties save. For most businesses offering health insurance, establishing a Section 125 plan is a no-cost step that generates immediate tax savings.
When employees pay their share of health premiums through a Section 125 plan, those contributions are excluded from FICA wages. This means:
| Scenario | Without Section 125 | With Section 125 | Annual Saving |
|---|---|---|---|
| 5 employees paying $150/mo employee share | FICA applies to $9,000/yr total employee contributions | FICA excluded on $9,000/yr | ~$688/yr employer FICA saved |
| 10 employees paying $175/mo employee share | FICA applies to $21,000/yr | FICA excluded on $21,000/yr | ~$1,607/yr employer FICA saved |
| 25 employees paying $175/mo employee share | FICA applies to $52,500/yr | FICA excluded on $52,500/yr | ~$4,016/yr employer FICA saved |
Shopping group health for your team
Most Florida payroll providers (Gusto, ADP, Paychex) include Section 125 plan document setup as part of their payroll service or as a low-cost add-on. Many benefits brokers also provide cafeteria plan documents at no additional charge when you enroll through them.
Our brokers help structure the full benefits package — including the Section 125 plan document.
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