Family-owned since 1982, based in Santee. CBIS sets up group health, dental, vision, life, disability and Section 125 plans for California employers, from the owner plus 1 employee to groups of about 250, with a named CBIS contact for each account.
Employees save because premiums paid are exempt from federal and state income tax as well as Social Security-Medicare (FICA) withholding.
That means pre-tax savings on payroll taxes and income taxes for employees, and the employer doesn’t pay its matching FICA tax on those salary deductions. Actual savings depend on each employee’s pay and tax situation.
Did you know?
Small employers often have the wrong idea about Section 125 plans. Much of the confusion comes from the line drawn by the Affordable Care Act (ACA or “Obamacare”) between Qualified Small Employers (QSEs) with fewer than 50 employees and Applicable Large Employers. QSEs don’t have to offer group health insurance under the employer mandate, so people assume the Section 125 rules don’t apply to them either.
Here are the four misunderstandings we hear most, and the facts behind each one.
“Qualified small employers are exempt from the Affordable Care Act (ACA, aka Obamacare) employer mandate, so we are not eligible to sponsor a Section 125 Premium Only Plan.” Not true. Employers of any size – even those with as few as one employee – are eligible to sponsor a Section 125 Premium Only Plan.
“Since employers with fewer than 50 employees are exempt from the ACA mandate, they are also exempt from the requirement for a written Section 125 plan document.” Not true. Without a written plan, employees’ pre-tax deductions can become taxable. Section 125 of the Internal Revenue Code requires a written plan document whether the plan covers 1 or 100,000 employees.
“Setting up a Section 125 plan for small employers is a lot of paperwork for just one employee.” Usually not. Setup comes down to three steps: sign, copy, and file. Once you receive the Section 125 plan document package via email, open the PDF and print it. Sign the plan document as indicated, give a copy of the Summary Plan Description (SPD) document to every eligible employee, and then file the document with other payroll or personnel papers for future reference. There is no requirement to file or forward the plan document to any agency.
“The cost of setting up a Section 125 plan for small employers with only a handful of employees is probably unreasonable.” Not necessarily. Employers who set up a new voluntary benefits program through us may qualify for Section 125 premium-only plan setup at no added cost. Eligibility and terms apply; ask us for details. Otherwise, there is a fee for the plan document, so ask us for pricing.
Employer tax savings
According to the KFF 2026 Employer Health Benefits Survey (opens in new tab), covered workers pay an average of $7,471 a year toward employer-sponsored family health coverage.
Using that figure, an employer’s 7.65% FICA savings on one employee would be about $570 in this example.
Savings like this add up with every additional employee who pays premiums pre-tax.
More than group health
Alongside employer-sponsored group health insurance premiums, a Section 125 plan can offer employees the chance to pre-tax premiums for supplemental policies such as group life, dental, vision, and certain types of disability and indemnity coverage.
The company can also add the Health Savings Account module and flex spending arrangements like the Health FSA, Limited Purpose FSA, and Dependent Care Assistance Plan (DCAP). Transit and parking benefits are a separate benefit under Section 132(f), not part of a Section 125 plan.
With every premium or flex contribution an employee makes using pre-tax salary deductions, the employer can lower its FICA taxes further. Savings can add up as the plan grows, which can help a small employer offer a fuller benefits package at a lower net cost after tax savings.
Get your Section 125 plan today
If you already offer group health benefits, a Section 125 POP or Cafeteria plan lets your employees pay for them pre-tax, whatever the size of your company.
- Employers of every size are eligible for the plan with the requisite written plan document in place.
- Employers who set up a new voluntary benefits program through us may qualify for plan document setup at no added cost. Eligibility and terms apply; ask us for details. Otherwise, there is a fee, so ask us for pricing.
- Setting up the plan is usually simple.
- To get started, get a benefits quote from us.
To get started by phone, call or text CBIS at (858) 283-7575.
CBIS is not a tax advisor; check with your CPA or tax professional.