How Section 125 Setup Works: 5 Steps in 30–60 Days

Step 1: Pre-Implementation Form

You complete a short form with the basics: your company, locations, employee count, pay frequency and payroll provider. This lets us confirm that you qualify (50+ employees, in an eligible state) and plan the rest of the setup.

Step 2: Sign the Agreements (DocuSign)

We send the plan documents and agreements by DocuSign. You review and sign them online. There is no setup fee and no minimum contract term.

Step 3: Payroll Setup Calls

We meet with you and your payroll representative to build a custom census report in your payroll system. This report gives us the employee and pay data the program needs. It is the step where your payroll provider does most of its work.

Step 4: Dry Runs

Before anything changes for real, we test the custom census report in our tax analyzer during a live payroll run. The dry runs confirm that the numbers are right and that the process fits your payroll schedule.

Step 5: Go Live

Your first payroll with Section 125 deductions runs, and the savings start on that payroll. Every employee is automatically enrolled and free to opt out, with at least 30 days to decline. Employees get their benefits, and you keep running payroll as usual.

What Can Make Setup Take Longer?

The 30–60 day range is accurate for most employers. When setup takes longer, it is usually for one of these reasons:

• The payroll provider: the biggest factor is how quickly your payroll representative builds the required files.
• Scheduling: how soon everyone can meet for the kickoff and payroll setup calls.
• Employee education: some employers choose a longer education period, so employees have more time to understand the program and their benefits.

Which Payroll Systems Work?

The program works with all major payroll systems, including ADP, Paychex, Paylocity, Paycom and Toast. Small-business payroll tools such as Gusto and QuickBooks Payroll also work, though setup can take a little more coordination with them. If you use a PEO, see how Section 125 works with a PEO.

Frequently Asked Questions

How long does it take to set up a Section 125 plan?

Most implementations take 30 to 60 days. Timing depends mostly on how quickly the payroll provider builds the required files, how soon meetings can be scheduled, and how long the employer runs employee education.

What are the steps to set up a Section 125 plan?

There are five steps: a pre-implementation form, signing the agreements by DocuSign, payroll setup calls to build a custom census report, dry runs during a live payroll, and go live.

Does setting up a Section 125 plan change our health insurance?

No. The plan sits on top of your existing coverage. Your current health plan stays exactly as it is.

Do employees have to sign up?

No. Every employee is automatically enrolled and free to opt out, with at least 30 days to decline.