Healthcare costs are unsustainable. We have solutions.

Businesses with at least 25 full-time W-2 employees, in every industry, in all 50 states. Nothing you have today changes: your health insurance, your broker relationship, your payroll provider, and your employees’ gross pay all stay exactly as they are, because the plan is in addition to your current plan. And you can implement it at any time of year, since there are no Open Enrollment restrictions.

Because these plans sit at the intersection of tax law, benefits law, and healthcare regulation — a lane neither advisor was hired to cover. CPAs focus on standard tax compliance and traditional deductions. Brokers focus on premiums. Neither works with this benefit structure without specific training in it. The gap is structural, not personal — some CPAs are aware of these plans, they just don’t go out and sell you on them; that isn’t what they do. One of our clients was told by their CPA that this was a “no brainer.” So please, go ask yours.

Section 125 of the tax code has allowed this since 1978. But it wasn’t until 2014 that ACA actuaries shifted their focus toward preventing poor health instead of paying the far costlier bill of treating it once it’s too late. It took four more years for the wellness and preventive plans we see today to launch. This is a very young industry — it won’t stay that way for long.

It’s also hard to break into the employee benefits business itself. Brokers are usually tight with HR, and HR doesn’t give our agents the time of day — they assume we’re offering the same thing everyone else does.

In three moves. Employees make a pre-tax election under Section 125 to cover the insurance premium, which lowers the income their payroll taxes are calculated on. Their federal, state, Social Security, and Medicare taxes drop, and part of that savings covers their care membership. With less taxable income on payroll, your FICA bill drops too. Once the taxes are paid, the insurance company issues back a claim for meeting the plan’s wellness provisions — which puts the employee’s paycheck higher than it was before.

Since the employee’s taxes are lowered through the Section 125 pre-tax election, the company’s matching FICA taxes are lowered right along with them. The national average FICA tax savings runs between $640 and $850 per employee — every single year.

“The rich aren’t like us — they pay less in taxes.”
— Peter De Vries

We all use the tax code. But do you honestly think you’re using it as well as multi-millionaires do? The codes are there — it’s up to us to use them, widely. Here are the codes these plans are built on:

• 1 IRS Pub. 15 — Names the plan type. Medical care reimbursements under an employer’s self-insured medical reimbursement plan are not wages, and are not subject to Social Security, Medicare, or FUTA taxes. Reissued every year.
• 2 IRC §125 — The pre-tax election your employees make. Under the tax code, those amounts are treated as employer contributions. Law since 1978.
• 3 IRC §105 — The self-insured medical reimbursement plan itself, and the exclusion of qualifying reimbursements from an employee’s income. Law since 1954.
• 4 IRC §106 — The exclusion of employer-provided coverage and qualifying reimbursements from wages. Law since 1954.
• 5 IRC §213(d) — The definition of medical care the plan is allowed to reimburse. Law since 1954.
• 6 IRC §3121 — The wage definition FICA is calculated on, and what sits outside it. Law since 1954.
• 7 Treas. Reg. §1.105-2 — The line the IRS draws: reimbursements must be tied to actual medical care, never paid irrespective of whether care happens. Final regulation.