You’ve undoubtedly heard of a Section 125 pre tax plan if you’re an employer or employee searching for more efficient ways to maximize your benefits funds. Health Savings Accounts (HSAs) may also be familiar to you. Although both offer significant tax benefits, it can be difficult to comprehend how they complement one another and how to optimize them.
At Health Sphere, we make this simple. Our Revive and Thrive plans combine the power of section 125 tax strategies with practical, family-focused benefits. They’re designed to save money for employers, provide richer coverage for employees, and integrate seamlessly with payroll, all without extra cost or complexity.
Let’s break down what these plans are, how they work with HSAs, and why they could be a game-changer for your organization.
What Is a Section 125 Pre-Tax Plan?
A section 125 pre tax plan, sometimes called a cafeteria plan, is a provision in the IRS tax code that allows employees to pay for certain benefits with pre-tax dollars.
Here’s what that really means:
- Money is deducted from an employee’s paycheck before federal income tax, Social Security, and Medicare taxes are applied.
- This lowers taxable income, which reduces the employee’s tax bill.
- Employers also save money on payroll taxes.
These plans can cover a variety of expenses, such as health insurance premiums, dental and vision coverage, dependent care assistance, and certain out-of-pocket medical costs.
In practice, a section 125 pre tax plan is a win-win: employees keep more of their earnings, and employers reduce costs, all without raising wages.
HealthSphere’s Revive and Thrive Plans
HealthSphere offers two robust Section 125 tax solutions tailored to both employers and employees: Revive and Thrive.
Revive
- Employer Savings: Around $1,100 per W2 employee per year, plus a 5–10% reduction in healthcare costs.
- Employee Benefits:
- 24/7 telemedicine & virtual care
- Family coverage with 12 annual care visits
- Mental health & counseling
- Employee Assistance Program (EAP)
- Mayo Clinic programs
- Minimal Essential Coverage (MEC)
- Group term life insurance ($60–$100/month value)
- Discounts on dental, vision, and prescriptions
- Prescription coverage with $0 copays
- In-person urgent care
What makes Revive stand out is the combination of family coverage and group term life insurance at no cost, giving employees and their families real peace of mind while supporting retention.
Thrive
- Employer Savings: Around $600 per W2 employee per year, plus a 5–10% reduction in healthcare costs.
- Employee Benefits:
- Increase net pay by approximately $100 per month
- 24/7 telemedicine & virtual care
- Spousal & dependent coverage
- Mental health & counseling
- Addiction recovery support
- Couples counseling & EAP
- Mayo Clinic programs
- Diet & stress management programs
- Health vitals facial scan tool
- $0 copays
Thrive focuses on wellness and take-home pay. Employees enjoy programs that improve daily life, while employers benefit from meaningful tax savings.
Both plans are fully IRS-compliant, ACA-ready, HIPAA-secure, and integrate with over 50 payroll systems, making administration simple and worry-free.
What Is a Health Savings Account (HSA)?
A Health Savings Account (HSA) is another powerful, tax-advantaged tool for employees enrolled in a high-deductible health plan (HDHP). It allows money to grow tax-free and be used for qualified medical expenses.
The triple tax advantage of an HSA includes:
- Contributions are tax-deductible or pre-tax through payroll.
- Savings grow tax-free.
- Withdrawals for qualified medical expenses are tax-free.
HSAs let employees save for future medical costs while reducing taxable income today.
Can Section 125 Plans and HSAs Work Together?
Yes, but there are rules to follow.
- If a section 125 plan includes a general-purpose FSA that reimburses all medical expenses, it may make employees ineligible for HSA contributions.
- The solution is a limited-purpose FSA (covering only dental and vision) or structuring the section 125 plan without a general FSA.
Health Sphere’s Revive and Thrive plans are carefully designed to maximize Section 125 tax savings while protecting HSA eligibility so that employees can benefit from both programs without complications.
How They Complement Each Other
When set up correctly, Section 125 pre tax plans and HSAs create a layered benefits strategy:
- Section 125 plans cover premiums and built-in services like telemedicine, mental health support, family coverage, and group term life insurance, all at $0 copays.
- HSAs allow employees to save tax-free for larger or unexpected medical expenses, including prescriptions, deductibles, and copays.
Together, they offer a strong safety net: predictable coverage for everyday and preventive care, plus flexibility to save for future healthcare needs.
The Benefits of Using Both
Employers and employees both gain when these programs work side by side:
- Greater Tax Savings: Employers save $600–$1,100 per W2 employee annually, while employees reduce taxable income and increase take-home pay.
- Expanded Coverage: Section 125 plans provide benefits that HSAs don’t, such as mental health programs, addiction recovery, and life insurance.
- Family Support: Both Revive and Thrive extend benefits to spouses and dependents.
- Flexibility: Employees can decide how to balance contributions and usage between accounts.
- Compliance & Ease: Health Sphere ensures plans are compliant and integrates directly with payroll systems.
Why Choose Health Sphere?
Health Sphere’s Revive and Thrive plans stand out because they combine compliance, value, and simplicity:
- Fully compliant with IRS, ACA, HIPAA, and Department of Labor rules
- Comprehensive coverage including telemedicine, counseling, wellness programs, and RX coverage
- Affordable, with $0 copays and no cost to the employer
- Family-first, covering employees, spouses, and dependents
- Proven results, with consistent payroll tax savings for employers
Whether your goal is improving retention, boosting morale, or cutting tax waste, Revive and Thrive deliver a smarter, more effective benefits strategy.
Final Thoughts
Employers can save money and provide significant benefits to their employees by implementing a Section 125 pre-tax plan, which is more than just a tax tool. When combined with an HSA, it creates a comprehensive plan that safeguards current income and accounts for future medical requirements.
Health Sphere’s Revive and Thrive plans make this simple, compliant, and cost-effective, delivering both tax savings and comprehensive coverage with no disruption.
Take the Next Step in Employee Benefits
Discover how Health Sphere’s Revive and Thrive plans can help you maximize payroll tax savings while providing richer benefits for your team.
Contact us today to get started with a compliant, cost-free solution.
