FAQs

What is a Section 125 Fully Insured Indemnity program?

A Section 125 Fully Insured Indemnity program combines two components:

Section 125 of the Internal Revenue Code (also called a Cafeteria Plan) allows employees to pay for qualified benefits with pre-tax dollars. The IRS defines it as "a separate written plan maintained by an employer for employees that meets the specific requirements and regulations of section 125 of the Internal Revenue Code. It provides participants an opportunity to receive certain benefits on a pretax basis."

Fully Insured Indemnity means the benefits are backed by a licensed insurance carrier and pay fixed dollar amounts for specific health events—like doctor visits, hospitalization, or preventive care—regardless of actual costs incurred.

Together, this structure allows employers and employees to reduce payroll taxes while providing valuable supplemental health benefits.

Are there any out-of-pocket expenses for this program?

No. You will pay nothing extra out of pocket for this program. Our fees are covered with a portion of your tax savings.

What are the benefits for employers?

Employers benefit from reduced payroll taxes (FICA, FUTA, and state unemployment taxes), improved employee retention, and enhanced benefits offerings at no additional cost. Our clients save on average $550 to $600 per employee per year in payroll taxes. For every 100 employees, you'll save approximately $60,000 per year. How much will you save?

What benefits do employees receive?

Employees receive supplemental health benefits including coverage for doctor visits, hospitalization, preventive care, and other qualifying health events. They also benefit from reduced taxable income, which means more take-home pay.

The indemnity benefits pay fixed amounts directly to employees, which can be used to cover deductibles, copays, or other out-of-pocket expenses.

Is this program IRS compliant?

Yes. Section 125 Cafeteria Plans have been part of the IRS tax code since 1978. Our program is fully insured through licensed insurance carriers and administered in strict compliance with IRS regulations, ERISA requirements, and applicable state laws.

What is the minimum employee count needed to qualify?

Our plans work best for businesses with 100+ employees or business owners with multiple locations. If you don't quite meet that criteria, please reach out and let's see what we can figure out together.

How long does implementation take?

Most implementations are completed within 30 to 60 days. This includes plan document preparation, employee enrollment, and payroll integration. Our team handles the administrative details to ensure a smooth rollout.

Does this replace our existing health insurance?

No. This program is designed to complement your existing health insurance, not replace it. The indemnity benefits work alongside major medical coverage to provide additional financial protection for your employees.

Do all employees have to participate?

Participation is voluntary for employees. However, higher participation rates result in greater overall tax savings for your organization. We provide enrollment support and educational materials to help employees understand the value of the program.