Section 125 Plans Explained

The simplest raise you can give your team — at zero cost to the dealership.

What is a Section 125 plan?

A Section 125 plan, also known as a cafeteria plan (named for the IRS code that authorizes pre-tax deduction), lets employees pay certain benefit premiums with pre-tax dollars instead of after-tax dollars. The premium comes out of their paycheck before federal income tax, FICA, and most state taxes are calculated.

What are pre-tax premiums?

Today, most employees pay benefit premiums after their paycheck has been taxed. Move that same premium in front of the tax calculation and two things happen at once:

  • The employee’s taxable wages go down, so their take-home pay goes up — typically 2–5%.
  • The dealership’s share of FICA goes down on that same dollar, so your payroll tax bill goes down.

What are gross wages?

Gross wages are what an employee earns before any taxes or deductions are applied. A Section 125 plan reduces the portion of gross wages that are subject to income tax and FICA — not the total wages the employee earned. W-2 reporting, retirement contributions, and overtime calculations are handled correctly inside the plan.

Is my medical plan affected?

No. Our Section 125 plan sits alongside your existing medical plan. It does not replace it, change its rating, or trigger a renewal. Elysian’s Section 125 program is designed to layer in without any change to your current broker relationship.

Elysian’s Section 125 plans are structured and reviewed in partnership with Brennan Manna & Diamond, LLC, a national law firm with deep tax-advisory expertise. Every dealership receives a plan document drafted specifically for its situation.

BMD Indemnity Plan Tax Advice

Every dealership that implements an Elysian plan receives a tax-advisory summary prepared in coordination with Brennan Manna & Diamond. The summary explains plan eligibility, payroll treatment, and how to communicate the benefit to your team in a way that stays on the right side of IRS rules.

Plan participants enjoy unlimited access.

Once the plan is live, enrolled employees can:

  • Use telemedicine any time, for any eligible reason, at $0 co-pay
  • Access the behavioral-health network confidentially
  • Pull their own claims and benefit information from the dashboard
  • Enroll eligible family members under the same plan at no additional cost
  • Reach plan tax professionals directly at no additional cost — questions about payroll treatment, eligibility, or W-2 reporting get answered quickly, as often as needed
$600
Average savings per employee per year
2–5%
Typical lift in employee take-home pay
0
Impact on your current medical plan
30–45
Days from signature to enrollment

Want the Section 125 math for your store?

Send us your headcount and we’ll build the tax-advantage model — no broker change required.

Get the Model