To maximize the benefits of the Section 125 plan, employees must know the allowable pre-tax expenses included in the plan. This information helps the employees choose the most suitable benefit for themselves and their dependents.
This blog provides an overview of the Section 125 allowable expenses to simplify choosing the most suitable plan for employees. It also highlights the benefits of Revive, an advanced and flexible Section 125 plan that employees and employers must explore.
What is a Section 125 Plan?
A Section 125 plan is an IRS-approved employee benefit program that allows workers to choose from a variety of pre-tax benefits. By using this plan, employees can reduce their taxable income by allocating a portion of their salary toward qualified benefits such as health insurance, flexible spending accounts, and dependent care. Section 125 plans provide flexibility and tax advantages while ensuring compliance with federal regulations, making them a valuable tool for both employers and employees.
Different Types of Section 125 Plan
Section 125 plans come in various types, each designed to offer employees flexible, pre-tax benefits while helping employers reduce payroll taxes. Understanding these different plan types helps organizations choose the best fit for their employees’ needs. Here are the different types of Section 125 plans:
- Premium Only Plan (POP): Allows employees to pay their health insurance premiums with pre-tax dollars, reducing taxable income without additional benefits.
- Flexible Spending Account (FSA) Plan: Enables employees to set aside pre-tax money for eligible medical, dental, and dependent care expenses.
- Full Cafeteria Plan: Offers a menu of benefit options, including health insurance, FSAs, and other fringe benefits employees can choose from.
- Simple Cafeteria Plan: A streamlined version of the full plan with fewer options, designed for smaller employers with simpler benefit needs.
Section 125 Allowable Expenses
Section 125 allowable expenses allow employees to use pre-tax dollars for a variety of eligible expenses, helping reduce taxable income while covering essential costs. Understanding Section 125 allowable expenses ensures that employees maximize their benefits and avoid any tax issues. These allowable expenses typically relate to healthcare and dependent care needs, providing financial relief through smart pre-tax spending. Here are the eligible Section 125 allowable expenses:
- Medical, dental, and vision care expenses not covered by insurance
- Prescription medications and certain over-the-counter drugs
- Dependent care costs
- Medical equipment and supplies
- Health insurance premiums through a Premium Only Plan (POP)
Elevating the Benefits of Section 125 Plan with Revive
Revive elevates the traditional Section 125 plan by integrating advanced, IRS-compliant strategies that maximize tax savings and streamline benefit administration. Developed by Health Sphere, Revive goes beyond basic cafeteria plan offerings by incorporating PCMP and SIMERP.
With built-in compliance support, customized implementation, and simplified benefit delivery, Revive transforms how organizations manage pre-tax benefits, making it a smarter, more strategic solution for today’s competitive workforce and evolving healthcare landscape.
Why Choose Revive?
Revive offers a modern, strategic approach to Section 125 Plan by combining compliance, customization, and cost-efficiency. It simplifies benefits administration while delivering substantial tax savings for employers and increased financial flexibility for employees. Its advanced structure, including PCMP and SIMERP, ensures a seamless and compliant benefits experience. Here are the key reasons why you should choose Revive:
- Advanced IRS-compliant design
- Streamlined benefits administration
- Reduced payroll tax liability
- Customized plan integration
- Enhanced employee satisfaction
Key Employer and Employee Benefits of Revive
Revive delivers powerful financial and operational advantages to both employers and employees through a streamlined, IRS-compliant Section 125 Plan. By integrating advanced benefit structures, it not only enhances workplace wellness and satisfaction but also significantly reduces costs and boosts performance. Here’s how Revive translates into real value for your organization and team:
Employer Benefits:
- Save ~$600 annually per W-2 employee
- No upfront or out-of-pocket costs
- Lower healthcare claims (5-10%)
- Automated rollout in 30–45 days
- Improves employee retention and productivity
- Delivers immediate cost savings to the bottom line
Employee Benefits:
- 3–4% increase in net pay (~$100/month)
- $0 copay for telehealth, wellness, and mental health services
- Access to Mayo Clinic health tools and dashboards
- Includes 12 annual healthcare visits
- $60-100/month Group Term Life Insurance
- Covers spouses, family members, and dependents
Key Takeaways: Optimize Your Section 125 Strategy with Revive
Effectively managing a Section 125 Plan starts with understanding which expenses qualify and how to administer the plan in compliance with IRS guidelines. Staying organized, maintaining clear documentation, and choosing the right plan provider are essential for maximizing savings and minimizing risk.
Revive stands out by simplifying plan management through automation, compliance support, and structured design. It not only helps reduce costs but also empowers employers and employees with tools and resources that make benefit utilization easier. For businesses looking to modernize their approach to pre-tax benefits, Revive offers a smart, future-ready solution tailored for lasting impact.
Maximize Your Tax Savings – Know What You Can Claim
Book a 10-minute consultation call today to uncover how Revive can uniquely align with your company’s goals while simplifying benefits and maximizing tax efficiency.
