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Section 125 plans

Section 125 plans from Paychex can save money for your company and employees

A section 125 premium only plan (POP) and flexible spending account (FSA), also known as cafeteria plans, can reduce FICA, federal, and state and local taxes* for your company and employees when combined with your company’s group health insurance.

The professionals at Paychex make section 125 plans even more appealing by handling much of the frustrating work required to start and manage them — so you can relax and enjoy the benefits.

Section 125 plans from Paychex
Doctor giving high five to little girl

A section 125 premium only plan can reduce taxes for your company and employees

A POP allows your employees to pay a portion of their insurance premiums on a pre-tax basis, effectively lowering their taxable income, as well as your company’s payroll taxes.

Increase section 125 plan savings with a flexible spending account

An FSA lets employees set aside pretax funds each year to pay for qualified medical expenses, such as:

  • Prescription drugs
  • Over-the-counter items**
  • Copays and deductibles
  • Eyeglasses/contact lenses
  • Chiropractic care
  • Child/dependent care
  • Non-cosmetic dental procedures
  • Orthodontia
  • Acupuncture
  • Psychiatric care

**A doctor's prescription for over-the-counter medicines and drugs must accompany a reimbursement claim form submitted to Paychex.

What sets Paychex section 125 plans apart?

  • Launch your section 125 plan

    Paychex helps you establish and manage your POP and FSA plans with important legal documentation, compliance testing, and status reports to help keep administration on track.

  • Find the answers you need

    Our toll-free section 125 support line is staffed by professionals highly trained in POP and FSA plans, their limits, and their benefits. They’ll be glad to answer your questions.

  • Establish an FSA for your 125 plan

    We help set up your FSA, process claims daily, and provide the legal documentation, compliance testing calculations, and reports to properly maintain your account.

  • Integrate a section 125 plan with your Paychex payroll

    Offering a section 125 plan through Paychex provides the benefits of integration with Paychex payroll. This makes plan administration easier while maximizing the accuracy of the data entered into the system.

  • Access our enrollment support and 125 plan resources

    Promote your POP and FSA plans with enrollment emails, flyers, and a poster, as well as a useful booklet and worksheet detailing how to enroll, the amount employees may contribute, and debunking common misconceptions about the plans.

  • Provide employees with more flexible plan options

    Give employees more flexibility in how they can use their FSA funds by choosing a plan design that allows participants to carry over up to $500 into the next plan year or a grace period until March 15 of the following plan year.

  • Give employees convenient access to funds

    Employees can use their Paychex Benefit Account debit card to access funds and pay for eligible items and services.

  • Check balances and manage plans on the go

    The Paychex Benefit Account mobile app, online portal, and toll-free FSA Information Line make account management easy.

  • Receive reimbursements with quick claim processing

    Reimbursements are sent Monday through Friday, and participants receive regular status reports and reminders.

Calculate your savings

See how much you and your employees could potentially save in taxes with a POP and FSA.

Premium Only Plan (POP) Tax Savings Calculator

In combination with group health insurance, a Premium Only Plan (POP) pays a portion of employee-paid insurance premiums on a pre-tax basis. This helps them save on health insurance costs while you save on certain payroll taxes. Use the calculator below to determine how much your business can save annually.

Total Annual Contributions from Employees

Tax Savings:

Paychex FSA Tax Savings Calculator

Employees who choose to open a flexible spending account (FSA) pay for out-of-pocket medical, dental, and dependent care expenses with pre-tax dollars. This gives employees more take-home pay, which decreases how much you pay in FICA and FUTA payroll taxes. Calculate how much you can save when your employees contribute money toward an FSA.

Total Number of Employees

Per Employee Annual Contribution

Warning

Tax Savings:

Total POP and FSA Tax Savings:

$0

Employee FSA Tax Savings Calculator

You can save on federal, state, and local taxes for many medical and dependent care expenses when you put pre-tax dollars into your flexible spending account (FSA). In fact, FSA participants save an average of up to 40 percent each year on many out-of-pocket expenses.*

Please note that eligible expenses will be reimbursed in full up to $2,650*** for medical expenses per plan year, and $5,000 for dependent care expenses per plan year. Any unused money at the end of the plan year will be forfeited. To avoid this, use the calculator below to base your dependent care or medical FSA contributions on an estimate of qualifying expenses that you and your family will have throughout the year.

Your Information

Medical Expenses

Please refer to our full list of health FSA-eligible expenses when making your calculations.

Add Medical Expense

Dependent Care Expenses

Please refer to our full list of dependent care expenses when making your calculations.

Add Dependent Care Expense
Calculate Savings

Potential Tax Savings: $0

Based on your spending, you should plan to contribute [total from medical] toward your medical FSA. You can contribute [X] more and still be fully reimbursed.

You have reached the medical FSA limit. You can maximize your tax savings potential by contributing the $2,650 maximum.

Based on your spending, you should plan to contribute [total from dependent] toward your dependent care FSA. You can contribute [X] more and still be fully reimbursed.

You have reached the dependent care FSA limit. You can maximize your tax savings potential by contributing the $5,000 maximum.

The information in this estimator should not be considered legal or accounting advice and it should not substitute for legal, accounting, and other professional advice. The estimated tax savings amount above is not a guarantee and is provided for informational purposes only. The actual tax savings may change depending on state, local, and other applicable taxes. Calculations are based on single filing. This estimator accounts for annual limits on FSAs, which are $2,650*** for medical expenses per plan year, and $5,000 for dependent care expenses per plan year. After this limit is reached, expenses are not reimbursed. If you require legal or accounting advice, or need other professional assistance, you should always consult your attorney, accountant, or other professional advisor to discuss your particular facts, circumstances, and business needs.

* Based on an average annual employee FSA contribution of $1,500. Specific savings depend on a participant's federal tax bracket and state and local tax rates.

*** Companies may set their own maximum for medical expense reimbursement maximum

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Acknowledged as one of the nation’s top agencies, Paychex Insurance Agency works with national and regional carriers to help you find the group medical, dental, vision, life, and short- and long-term disability plans that best fit your business and your employees.

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