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Section 125 FICA Savings Calculator

Calculate how much your company saves in FICA taxes by offering a Section 125 cafeteria plan. Pre-tax health premiums, FSA, HSA, and DCAP contributions all reduce employer payroll taxes.

Step 1 — Your Company

Company & Payroll Details

Enter your basic company information. These numbers drive the core FICA savings calculation — the more employees contributing pre-tax, the more you save.

Number of Eligible Employees ?Full-time employees eligible for your Section 125 plan. Include all employees who participate in or are eligible for pre-tax benefit deductions. Part-time employees working 30+ hours may also be eligible under ACA rules.Source: IRC Section 125; IRS Notice 2012-9

Average Annual Salary ?The average gross annual salary across all eligible employees. This determines which employees are above the Social Security wage base ($168,600 in 2025) and only save the Medicare portion (1.45%) rather than the full FICA rate (7.65%).Source: SSA wage base 2025; BLS average wage data

Avg Employee Health Premium Contribution (per month) ?The average monthly amount each employee contributes toward health insurance premiums via pre-tax payroll deduction under your Section 125 plan. This is the employee share only, not the total premium. The national average is about $100-$500/month depending on coverage tier.Source: KFF 2025 EHBS; average employee contribution to premiums

Step 2 — Additional Pre-Tax Benefits

FSA, HSA & DCAP Participation

Section 125 lets employees contribute to flexible spending accounts, health savings accounts, and dependent care accounts on a pre-tax basis. Each dollar contributed saves both employer and employee FICA taxes.

FSA Participation Rate 30% ?Percentage of eligible employees who participate in a Healthcare Flexible Spending Account (FSA). The 2025 annual limit is $3,300. Average participation rates are 25-40% of eligible employees.Source: EBRI; IRS Rev. Proc. 2023-34; average FSA participation rates

Average FSA Election ?Average annual FSA election amount per participating employee. The 2025 maximum is $3,300. The average election is typically $1,500-$2,500.Source: EBRI FSA Database; IRS annual limits

HSA Participation Rate 20% ?Percentage of eligible employees contributing to a Health Savings Account (HSA). Only employees enrolled in a qualifying HDHP can contribute. 2025 limits: $4,300 individual / $8,550 family.Source: IRS Rev. Proc. 2024-25; Devenir HSA Research Report

Average HSA Contribution ?Average annual HSA contribution per participating employee (employee portion only). 2025 limits: $4,300 individual / $8,550 family. Average contributions are $2,000-$4,000.Source: Devenir 2024 HSA Report; IRS annual limits

DCAP Participation Rate 10% ?Percentage of eligible employees using a Dependent Care Assistance Program (DCAP/DCFSA). The 2025 annual limit is $5,000 ($2,500 if married filing separately). Typical participation is 5-15%.Source: IRC Section 129; EBRI; IRS Publication 503

Average DCAP Election ?Average annual DCAP election per participating employee. The limit is $5,000 ($2,500 married filing separately). Average elections are $3,000-$5,000 for participating employees.Source: IRC Section 129; average DCAP election data

Your Results

Section 125 Tax Savings Analysis

Your total employer and employee tax savings from pre-tax benefit deductions under IRC Section 125.

Total Annual Employer FICA Savings

$0 per employee per year

7.65% FICA on total pre-tax deductions (6.2% SS + 1.45% Medicare)

Total Annual Employee Tax Savings

$0 per employee per year

FICA (7.65%) + estimated federal income tax (~22%)

Combined Total Annual Savings

Employer + Employee tax savings combined

Savings Breakdown by Benefit Type

Benefit	Participants	Total Pre-Tax $	Employer FICA Saved	Employee Tax Saved

With Section 125 vs Without

Metric	Without S125	With S125	Savings

Annual Savings by Category

Employer FICA

Employee Tax

Implementation ROI

Est. Annual Admin Cost

TPA + compliance

Net Employer Savings

After admin costs

ROI

Savings / Admin Cost

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Built on Real Data — Not Guesswork

This tool uses current IRS tax rates and contribution limits, calibrated to 2025-2026 tax year data.

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IRS Publication 15

Federal FICA tax rates: 6.2% Social Security + 1.45% Medicare = 7.65% employer share. 2025 SS wage base: $168,600.

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IRC Section 125

Cafeteria plan rules allowing pre-tax deduction of health premiums, FSA, HSA, and DCAP contributions from taxable wages.

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SSA Wage Base Updates

Social Security Administration annual wage base adjustments. Employees above $168,600 only save the Medicare portion (1.45%).

Want a Personalized Analysis?

Get a detailed Section 125 implementation report with your specific numbers — reviewed by a benefits advisor.

Calculation Methodology ▼

How This Calculator Works

Employer FICA Rate: 7.65% (6.2% Social Security + 1.45% Medicare) on wages up to $168,600. Above that, only 1.45% Medicare applies.
Employer Savings = Total pre-tax deductions across all employees × 7.65% (or 1.45% for wages above SS cap)
Employee Savings = Pre-tax deductions × (7.65% FICA + ~22% marginal federal income tax rate) = ~29.65% total tax savings
SS Wage Base Cap: $168,600 (2025). Employees earning above this save only the Medicare portion (1.45%) on employer side.
Admin Cost Estimate: $4-6 per employee per month for TPA services, plus ~$1,500 setup/compliance cost amortized
FSA Limit: $3,300 (2025); HSA Limit: $4,300 individual / $8,550 family; DCAP Limit: $5,000

Disclaimer: This calculator provides estimates for educational purposes. Actual tax savings depend on individual employee wages, tax situations, and plan design. Data sources: IRS Publication 15, IRC Section 125, SSA, EBRI. Calibrated to 2025-2026 tax year.