How much does a Section 125 plan save an employer?

7.65% of every pre-tax dollar employees contribute, minus plan-document and administration costs. Twenty employees contributing $500 a month is $120,000 a year pre-tax and about $9,180 of employer FICA avoided — the calculator nets out the costs on your numbers.

Do I have to offer health insurance?

Applicable large employers (50 or more full-time-equivalent employees) face §4980H penalties if they do not offer affordable, minimum-value coverage: $3,780 and $5,670 per employee for 2027 (Rev. Proc. 2026-22). Under 50, there is no federal mandate, but the Small Business Health Care Tax Credit (Form 8941) may apply to groups under 25 that buy through the SHOP.

Calculators

Four Calculators, Every Assumption On A Slider

Section 125 savings, the renewal impact, the 2027 employer mandate, and an ICHRA budget. Carry the results straight into a review.

1. Section 125 Savings

Employees25

Participation80%

Monthly pre-tax amount per participant$500

Employees' federal bracket22%

State income tax0%

Admin fee per participant per month$5

Plan document / setup$500

Employer net savings, year one

Employer FICA avoided

Employees' tax avoided (combined)

ROI on plan costs

Employer: pre-tax contributions × 7.65%, minus admin and setup. Employees: contributions × (bracket + state + 7.65%). Owners excluded per the code. Not tax advice.

Where The Savings Land

Employer FICA vs employees' combined tax savings at the inputs on the left.

2. Renewal Impact

Current total monthly premium$12,000

Proposed increase14%

Employer share70%

Added cost next year, employer

If it matched Mercer's +8.2%

Premium × 12 × increase × employer share. Mercer projects +8.2% per employee in 2027 after plan changes.

3. 2027 Employer Mandate & Affordability

Full-time-equivalent employees60

Lowest-paid full-time employee's monthly wage (W-2 safe harbor)$3,000

Employee's monthly cost, lowest self-only plan$250

Affordable at 10.22%?

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§4980H(a) exposure if no offer (2027)

§4980H(b) per subsidized employee (2027)$5,670

2027: affordability 10.22% (Rev. Proc. 2026-26); penalties $3,780 (a) and $5,670 (b) (Rev. Proc. 2026-22); (a) applies to full-time employees minus 30 (part-time FTEs are not counted). Under 50 FTEs: no mandate.

4. ICHRA Budget

Employees25

Monthly allowance per employee$500

Current group plan, employer cost per employee per month$650

ICHRA admin per employee per month$10

Annual employer difference

(Group cost − allowance − admin) × employees × 12. Positive means the ICHRA budget is lower. Employee-side premiums in your county decide whether the allowance is adequate — the review checks that.

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