What is a Section 125 plan and how does it save money?
A Section 125 (or Cafeteria) plan allows employees to pay their share of health insurance premiums with pre-tax dollars, reducing their taxable income. This saves employees money directly — and saves the employer on payroll taxes (FICA).
For a company with 20+ employees, the employer FICA savings alone can be substantial. Many small businesses have never been shown this structure. It's one of the most underutilized tax strategies available to California employers.
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