Questions Employers Ask
Answered the way a benefits advisor would across the table.
What is a Section 125 plan, in plain English?
A written plan under Internal Revenue Code §125 that lets employees pay their share of premiums (and, with an FSA, eligible expenses) with pre-tax dollars. The employee skips federal income tax and 7.65% FICA on those dollars; the employer skips its matching 7.65% FICA. It requires a plan document, annual nondiscrimination testing and payroll set-up — it is not a product you buy.
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.
Is the 'wellness plan that pays employees cash back tax-free' legal?
The IRS says the cash is taxable wages. Chief Counsel Advice 202323006 (2023) held that fixed-indemnity wellness payments funded with pre-tax premiums are wages subject to income tax and FICA when the employee has no unreimbursed medical expense, and IR-2024-65 and the 2024 final rule reinforced it. California's Department of Insurance issued a cease-and-desist against a related program. We do not sell those plans.
Who cannot participate in a Section 125 plan?
Self-employed owners: sole proprietors, partners, and more-than-2% S-corporation shareholders (and certain family members) cannot participate on a pre-tax basis. C-corporation owner-employees can.
Does Section 125 work in every state?
Federal income tax and FICA treatment is national. State income tax treatment is generally the same, with New Jersey a notable exception that does not conform to §125 for state income tax.
What is level funding and is it right for a 25-person group?
A self-funded plan with a fixed monthly cost and stop-loss insurance; if claims run low, part of the surplus may be refunded. KFF 2026 reports 38% of covered workers at small firms are in level-funded plans. It fits groups with good claims experience; the quote comes with the fully insured alternative side by side.
What is an ICHRA and why would a small employer use one?
An Individual Coverage HRA (renamed the CHOICE Arrangement in 2026 federal messaging): the employer sets a fixed tax-free monthly allowance by employee class, employees buy individual coverage, and the group renewal letter goes away. Works for any size; the allowance must be offered on the same terms within a class.
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.
What does a benefits review cost?
Nothing to the employer for groups of up to 500 employees. Carriers pay broker commissions, which are disclosed on request. Section 125 plan documents and administration are third-party costs we quote up front.
How long does it take?
About three weeks from census to decision: one week to market the group, one week for carrier proposals, one week for your decision and enrollment set-up. Faster when the renewal clock demands it.
Is my request sold to other companies?
No. Requests go to the licensed agents of Vitality Health Advisors LLC (dba NovaVida Group) and are not sold or shared with other agencies.