Business owners always try to increase profits while making sure their team members are taken care of. A Section 125 Plan both solves these needs and does not cause any disruption to the company.

The firm helps businesses adopt this lesser-known way to cut their payroll tax charges and leave their employees with bigger pay cheques. The best part is that it is fully approved by Internal Revenue Code 125 and keeps your employees’ insurance and your insurers the same.

We’ll take you through the basics of a Section 125 Plan, explain its function and show you why it is valuable for reducing costs in any business.

What is a Section 125 Plan?

A Section 125 Plan—also known as a Cafeteria Plan—is an IRS-approved program that enables employees to pay for certain benefits with pre-tax dollars. These include common expenses such as:

• Health insurance premiums
  
• Dental and vision plans
  
• Dependent care assistance
  
• Certain out-of-pocket medical costs
  

Taxes are collected from employee paychecks before they are taxed, this way reducing their taxable wages. Now, employers can save money on payroll taxes and employees will enjoy higher net wages.

This outline for pre-tax benefits is set by Internal Revenue Code 125.

Key Employer Advantages

Businesses that implement a Section 125 Plan experience significant and ongoing financial benefits.

1. Reduced Payroll Taxes

Because employees contribute to benefits before taxes, your business owes less in:

• FICA (Social Security and Medicare)
  
• FUTA (Federal Unemployment)
  
• SUTA (State Unemployment)

This can translate into thousands of dollars in annual savings, especially for companies with 10 or more employees.

2. Zero Disruption to Existing Plans

One of the most valuable features is that it doesn’t require any change to your current benefits providers. Renaissance Advisory structures the plan around your existing insurance setup, ensuring a smooth and non-invasive implementation.

3. No Out-of-Pocket Costs

You don’t pay anything upfront. We create and administer the plan on a performance-based model, meaning we only get paid if we deliver results.

4. Boosted Employee Satisfaction

Offering this benefit shows your team that you’re invested in their financial well-being. When employees see more in their take-home pay, morale improves—and so does retention.

Employee Advantages

From the employee perspective, a Section 125 Plan delivers immediate, visible value without requiring any additional cost or effort.

1. More Take-Home Pay

By deducting contributions pre-tax, employees lower their taxable income. The end result? More money in each paycheck, even though their benefits coverage remains the same.

2. No Added Cost or Plan Changes

There’s no new insurance to sign up for, no forms to complete, and no changes to their benefits. Employees keep what they already have, just in a more tax-efficient format.

3. Simple and Seamless

With Renaissance Advisory handling the administration and compliance, your team doesn’t have to lift a finger. Everything happens behind the scenes via payroll adjustments.

How a Section 125 Plan Works

Let’s walk through a typical implementation process when you partner with Renaissance Advisory:

Step 1: Discovery and Consultation

We conduct a quick, no-cost review of your current payroll and benefits setup. If your company qualifies, we’ll outline your potential tax savings—often in less than 10 minutes.

Step 2: Custom Plan Creation

We prepare a legally required Section 125 Plan Document tailored to your organization. This ensures full compliance with Section 125 and protects you in the event of an IRS audit.

Step 3: Payroll Adjustment

We update your payroll system to reflect pre-tax deductions for eligible employee contributions in collaboration with your internal or external payroll provider, usually with minimal changes.

Step 4: Ongoing Compliance & Support

Renaissance Advisory is on hand to assist, manage any changes and guarantee the business follows Internal Revenue requirements every year.

IRS Compliance is Critical

The potential savings of a Section 125 Plan are only as good as the plan’s legal integrity. If a plan is not properly documented or maintained, it could lead to IRS penalties or disqualification.

That’s why Renaissance Advisory ensures:

• Written Plan Documents are in place and up to date
• Eligibility requirements are properly defined.
• Nondiscrimination testing is conducted, if applicable.
• Payroll implementation is correct and auditable.
  

Our specialists design plans that meet all regulatory guidelines under the Internal Revenue Code, relieving your internal team of the compliance burden.

Who Qualifies?

A Section 125 Plan is best suited for:

• Businesses with 5 or more W-2 employees.
• Companies that already offer health insurance or other qualified benefits.
• Organizations are seeking to reduce payroll tax liability without disrupting existing systems.

Whether you’re in healthcare, construction, education, retail, or professional services, the model is adaptable to your specific business needs.

Why Choose Renaissance Advisory?

At Renaissance Advisory, we go beyond compliance. Our goal is to deliver results with zero upfront risk.

Here’s how we stand apart:

• Contingency-Based Model – You don’t pay unless we save you money.
• Speed & Simplicity – Implementation is fast, seamless, and non-disruptive.
• Full Support – From documentation to payroll collaboration, we handle it all.
• Cross-Industry Expertise – We’ve successfully rolled out plans across a wide range of sectors.
• Client-First Focus – Everything we do centres on delivering measurable value to your business.

Real Cost Savings, Real Impact

A well-structured Section 125 Plan can generate significant tax relief annually:

• A business with 20 employees could save $20,000–$30,000+ per year in payroll taxes
• Employees may each see an additional $1,200–$2,000 in net pay annually.
• These savings compound year over year with zero disruption to daily operations
  

And remember, this strategy is fully compliant with Internal Revenue Code 125, giving you peace of mind while enhancing your profitability.

Final Thoughts

A Section 125 Plan is unique, approved by the IRS and saves both employers and employees real money.

If companies follow the Internal Revenue Code for this approach, they experience better cash flow, improved teamwork and can grow more confidently.

At Renaissance Advisory, we’ve made it our mission to deliver solutions that work, backed by real numbers and zero guesswork.

Start building smarter today. Let’s unlock your savings—together.