What Does a Section 125 Plan Cost an Employer?
Published October 28, 2026 | 5 min read
Most employers ask the same question before anything else: what will this cost us? It is a fair question. Many benefits programs come with setup fees, plan-document charges and monthly administration bills.
Our program works differently. Here is exactly how the cost works, and why the employer never pays out of pocket.
The Short Answer
- No setup fee. You do not pay to start the program.
- No minimum contract. You are not locked into a term.
- No out-of-pocket cost. Our fee is a per-employee monthly fee that is paid from the payroll tax savings the program creates.
Because the fee comes out of the savings, the program pays for itself. The money you save on payroll taxes stays in your bank account, and the fee is covered by part of that savings.
Where the Savings Come From
A Section 125 plan lets employees pay for qualified benefits with pre-tax dollars. That lowers their taxable wages, and it lowers the employer’s payroll taxes on those wages:
- FICA: 7.65% (Social Security and Medicare) on every pre-tax dollar
- FUTA and state unemployment taxes on the same wages
Most employers save $650–$850 per employee per year. At 50 employees, that is about $32,500 a year. At 100 employees, about $65,000. The savings start on the first updated payroll run.
What Employees Pay
Employees do not pay out of pocket either. Every employee is automatically enrolled and free to opt out, and their take-home pay typically rises about 4–6% because more of their pay is sheltered from tax. For example, a $15/hour employee paid bi-weekly takes home about $35 more per paycheck, with the same gross pay.
In return, employees get benefits such as unlimited virtual care with no copay, $0-copay generic prescriptions and hospital indemnity cash benefits. See the full benefits list.
How This Compares to Other Section 125 Options
Many Section 125 administrators charge for the plan document, for setup, and for ongoing administration, whether or not the plan saves you money. Those costs come out of the employer’s budget.
With our program, the fee is tied to the savings. There is no separate invoice for plan documents, setup or onboarding, and no contract term to wait out if your business changes.
Who Qualifies
The program requires at least 50 employees. Owners with multiple locations can count employees across their locations. The program is available in 40 states; see state availability for the 10 states where we cannot currently enroll businesses.
Frequently Asked Questions
Is there a setup fee for a Section 125 plan?
No. There is no setup fee and no charge for the plan document or onboarding.
Is there a minimum contract term?
No. There is no minimum contract term.
How is the program fee paid?
The fee is a per-employee monthly fee paid from the payroll tax savings the program creates, so the employer does not pay it out of pocket.
How much does an employer save with a Section 125 plan?
Most employers save $650 to $850 per employee per year in payroll taxes. That is about $32,500 a year at 50 employees and about $65,000 at 100 employees.