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Section 125 FICA Savings Calculator

Calculate how much your company saves in FICA taxes by offering a Section 125 cafeteria plan. Pre-tax health premiums, FSA, HSA, and DCAP contributions all reduce employer payroll taxes.

Step 1 — Your Company
Company & Payroll Details
Enter your basic company information. These numbers drive the core FICA savings calculation — the more employees contributing pre-tax, the more you save.
Step 2 — Additional Pre-Tax Benefits
FSA, HSA & DCAP Participation
Section 125 lets employees contribute to flexible spending accounts, health savings accounts, and dependent care accounts on a pre-tax basis. Each dollar contributed saves both employer and employee FICA taxes.
Your Results
Section 125 Tax Savings Analysis
Your total employer and employee tax savings from pre-tax benefit deductions under IRC Section 125.
Total Annual Employer FICA Savings
$0
$0 per employee per year
7.65% FICA on total pre-tax deductions (6.2% SS + 1.45% Medicare)
Total Annual Employee Tax Savings
$0
$0 per employee per year
FICA (7.65%) + estimated federal income tax (~22%)
Combined Total Annual Savings
$0
Employer + Employee tax savings combined
Savings Breakdown by Benefit Type
BenefitParticipantsTotal Pre-Tax $Employer FICA SavedEmployee Tax Saved
With Section 125 vs Without
MetricWithout S125With S125Savings
Annual Savings by Category
Employer FICA
Employee Tax
Implementation ROI
Est. Annual Admin Cost
$0
TPA + compliance
Net Employer Savings
$0
After admin costs
ROI
0%
Savings / Admin Cost
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Built on Real Data — Not Guesswork

This tool uses current IRS tax rates and contribution limits, calibrated to 2025-2026 tax year data.

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IRS Publication 15

Federal FICA tax rates: 6.2% Social Security + 1.45% Medicare = 7.65% employer share. 2025 SS wage base: $168,600.

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IRC Section 125

Cafeteria plan rules allowing pre-tax deduction of health premiums, FSA, HSA, and DCAP contributions from taxable wages.

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SSA Wage Base Updates

Social Security Administration annual wage base adjustments. Employees above $168,600 only save the Medicare portion (1.45%).

Get a Free Custom Report

Get a detailed Section 125 implementation report with your specific numbers — prepared by a BENEFITRA advisor.

Calculation Methodology ▼
How This Calculator Works
  • Employer FICA Rate: 7.65% (6.2% Social Security + 1.45% Medicare) on wages up to $168,600. Above that, only 1.45% Medicare applies.
  • Employer Savings = Total pre-tax deductions across all employees × 7.65% (or 1.45% for wages above SS cap)
  • Employee Savings = Pre-tax deductions × (7.65% FICA + ~22% marginal federal income tax rate) = ~29.65% total tax savings
  • SS Wage Base Cap: $168,600 (2025). Employees earning above this save only the Medicare portion (1.45%) on employer side.
  • Admin Cost Estimate: $4-6 per employee per month for TPA services, plus ~$1,500 setup/compliance cost amortized
  • FSA Limit: $3,300 (2025); HSA Limit: $4,300 individual / $8,550 family; DCAP Limit: $5,000

Disclaimer: This calculator provides estimates for educational purposes. Actual tax savings depend on individual employee wages, tax situations, and plan design. Data sources: IRS Publication 15, IRC Section 125, SSA, EBRI. Calibrated to 2025-2026 tax year.

How a Section 125 plan cuts payroll taxes

A Section 125 cafeteria plan lets employees pay for qualified benefits with pre-tax dollars. Because those dollars come out before payroll taxes, both the employee and the employer pay less. For the employer, the saving is the FICA match, currently 7.65 percent (6.2 percent Social Security plus 1.45 percent Medicare), on every dollar employees route through the plan.

The savings add up faster than most employers expect. A premium-only plan, the simplest form of Section 125, captures employer FICA on health premiums alone. Adding an FSA, HSA contributions, and a dependent care account widens the pre-tax base and the saving with it.

To put the recovered dollars to work, run the Benefits Savings Strategy Builder for the other efficiency levers, or the Benefits ROI Calculator to model the return on reinvesting them.

Pre-tax items a Section 125 plan can cover:

The rules for cafeteria plans are set by the IRS.

Frequently asked questions

How much can an employer save with Section 125?

The employer saves its FICA share, 7.65 percent, on every pre-tax dollar. The total depends on how many employees participate and how much they route through the plan.

What benefits qualify for pre-tax treatment?

Common qualified items include health, dental, and vision premiums, health and dependent care flexible spending accounts, and HSA contributions made through the plan.

Is a Section 125 plan hard to set up?

A premium-only plan is straightforward and requires a written plan document and basic nondiscrimination testing. The administrative lift is modest relative to the savings.

Reviewed by Sam Newland, CFP, Founder of Benefitra. Last updated June 2026.