Maximize Your Corporate Tax Efficiency
Analyze the total annual impact of implementing a Section 125 Cafeteria Plan. Reduce your FICA burden and improve your bottom line.
Why Analyze Company-Wide Savings?
Stop leaving money on the table. Our proprietary calculator reveals the exact financial impact of pre-tax benefit strategies for your entire organization.
FICA Reduction
Bottom Line Impact
Compliance Ready
Pre-tax
You save on taxes now.
The money comes out of your paycheck before taxes are calculated, helping you shrink your taxable paycheck before taxes hit it.
Example: If you earn $5,000 and put $200 into a pre-tax health premium, taxes are calculated on about $4,800 instead of $5,000. That is why pre-tax benefits usually feel cheaper than the sticker price.
Common Examples:
Medical premiums (cafeteria plan), health FSA, dependent care FSA, some commuter benefits.
After-tax
You don't save on taxes now.
The money comes out of your paycheck after taxes have already been taken out. Because they don't reduce taxable income, there is no upfront tax savings.
Example: If you pay $200 for an after-tax benefit, taxes are still calculated on the full $5,000, and then the $200 comes out afterward.
Common Examples:
Roth contributions, disability insurance, union dues, charitable deductions, garnishments.
Tax-free
You don't pay tax when used.
The benefit or reimbursement is not taxed when you receive or use it, assuming it meets IRS rules. You keep more of the benefit.
Example: If you use HSA money to pay an eligible copay, prescription, or other qualified medical expense, that use of the money is generally tax-free.
Common Examples:
HSA/FSA/HRA reimbursements for qualified medical expenses; some employer health coverage.
Where People Get Tripped Up
After-tax and tax-free are not opposites. A benefit can be paid for after-tax but produce a tax-free payout later. For example, when disability insurance premiums are paid after-tax, claim benefits are often tax-free later. If paid pre-tax, benefits may be taxable.
Another confusion is that not every employer benefit is automatically tax-free. For instance, group-term life insurance can receive favorable treatment, but the value of coverage over $50,000 generally becomes taxable.
The One-Line Version
- Pre-tax:"I get the tax break now."
- After-tax:"I pay tax now."
- Tax-free:"I don't pay tax when I use or receive the benefit."
The Hidden ROI of Benefits
When employees pay for benefits with pre-tax dollars, it lowers their taxable income. This means they save on income tax, and you save exactly 7.65% on matching FICA taxes for every dollar contributed.
Standard Payroll (No Pre-Tax Benefits)
Optimized Payroll (With Pre-Tax)
Multiply that $383 by 50 employees, and you've saved almost $20,000 just by offering benefits.
Simple, Fast, and Accurate
- Enter your total number of employees
- Adjust average participation rates
- Input average monthly premiums
- Instantly view your total annual tax savings