Brokers hear it all the time.
“How can adding a benefit actually increase our revenue?”
It sounds counterintuitive. But once you walk a broker or employer through the actual math, the skepticism tends to disappear. The key is understanding how the FICA tax wedge works and why a well-structured Section 125 plan yields a net positive result in the company ledger.
Start With the Dollar That Leaves Someone’s Paycheck
When an employee earns a dollar, that dollar doesn’t travel alone. Both the employee and the employer pay FICA taxes on it, at a rate of 7.65% each, covering Social Security and Medicare. That means for every dollar of gross wages, the employer is actually spending $1.0765 when you factor in their share.
Now introduce a Section 125 pre-tax deduction.
When an employee elects to redirect a portion of their compensation into a pre-tax benefit, that amount is excluded from FICA calculations entirely. Neither the employee nor the employer pays FICA on those dollars.
Where the “Net-Neutral” or “Net-Positive” Result Comes From
Here’s a simplified illustration:
Without the benefit:
- Employee earns $3,000/month
- Employer FICA on $3,000: $229.50
With a $150/month pre-tax benefit election:
- FICA is now calculated on $2,850
- Employer FICA on $2,850: $218.02
- Employer FICA savings: $11.47/month per employee
Multiply that across a workforce of 100 employees, and the employer is saving over $13,700 per year in FICA liability, simply by offering the benefit.
In many cases, those savings offset the cost of administering the benefit entirely, resulting in a net-neutral or net-positive outcome for the employer, while employees gain a benefit they value.
Why Brokers Should Walk Clients Through This
The objection isn’t really about the math. It’s about unfamiliarity. Employers are accustomed to thinking of benefits as expenses. Showing them a transparent, line-by-line breakdown shifts the conversation entirely.
A few principles that make this work in practice:
- The benefit must be structured under a valid Section 125 plan to qualify
- Participation levels affect total savings. Broader enrollment generally means greater employer FICA reduction
- The plan administration cost itself needs to be factored in for a true net calculation
When all of this is laid out clearly, the “too good to be true” objection tends to answer itself.
The Paradigm Pathways Approach
The Paradigm Pathways Integrated Health Can Plan is designed to make this conversation easy for brokers. By combining a compliant Section 125 structure with supplemental benefits employees genuinely want, the math works as it should: the employer saves on FICA, employees gain benefits, and, for many eligible employers, projected payroll-tax savings may exceed the employer’s administration cost. A company-specific analysis is required.
That’s not a sales pitch. That’s arithmetic.
