Which Expenses Qualify Under Section 125 Allowable Expenses?
For employers and HR leaders looking to strengthen their benefits offerings without added cost, understanding Section 125 allowable expenses is key. Even more important is knowing how to maximize those benefits with a solution like Health Sphere’s Core360 plan—a fully compliant, automated program that leverages Section 125 pre-tax savings along with two powerful additions: a Preventative Care Management Plan (PCMP) and a Self Insured Medical Reimbursement Plan (SIMRP).
In this blog, we’ll break down exactly which expenses are considered Section 125 eligible expenses, how Core360 takes those tax advantages even further, and why more than 30,000 employees are already enrolled in this smart, cost-free benefit solution.
What Is a Section 125 Plan?
Let’s start with the basics—but in plain English.
A Section 125 plan, also called a “cafeteria plan,” allows employees to set aside a portion of their income before taxes to pay for qualified health-related expenses. That means less taxable income for employees and lower payroll taxes for employers.
But here’s where Health Sphere’s Core360 plan makes the difference: it doesn’t stop with traditional Section 125 pre-tax savings. Instead, it leverages Section 125 allowable expenses as part of a broader, integrated strategy that includes fully managed PCMP and SIMRP components, creating one of the most compliant, benefit-rich programs on the market.
What Counts as Section 125 Allowable Expenses?
So, what expenses qualify under a Section 125 plan? While the exact list can vary depending on how a plan is structured, most Section 125 eligible expenses include:
- Health insurance premiums (medical, dental, vision)
- Co-pays and deductibles
- Prescription medications
- Over-the-counter medications (with a prescription)
- Medical equipment like crutches, braces, or hearing aids
- Mental health therapy and counseling
- Chiropractic care
- Dependent care expenses
- Vision care (eyeglasses, exams, LASIK)
- Dental procedures (cleanings, fillings, braces)
These are all examples of common Section 125 allowable expenses that employees can pay for using pre-tax dollars. The result? Significant savings on their total taxable income.
But again, this is only the beginning.
Core360: Taking Section 125 Eligible Expenses Further
Health Sphere’s Core360 program is not a typical Section 125 plan. It’s a strategic upgrade that combines the tax-saving advantages of Section 125 with a fully managed PCMP and SIMRP. That means more value with zero disruption.
With Core360, employees don’t just get the ability to set aside pre-tax dollars—they also gain access to enhanced benefits with no change in their take-home pay. In fact, many employees see a 3–4% net increase in their paycheck, often translating to around $100/month more in their pocket.
For employers, Core360 offers an average savings of $600 per employee per year—resulting in $60,000 in annual savings for every 100 W-2 employees.
- No out-of-pocket cost
- Fully compliant and automated
- Quick 30–45 day rollout
- Immediate bottom-line impact
- No changes to existing plans
Why Compliance and Simplicity Matter
One of the biggest challenges companies face when implementing benefit programs is staying compliant without creating more administrative complexity. That’s where Core360 shines.
Because it’s managed end-to-end, Core360 ensures that all Section 125 allowable expenses are handled within IRS guidelines, without requiring your HR team to become legal experts. The program is turnkey, fully automated, and completely transparent—so you can focus on your people, not paperwork.
And let’s be clear: this is not a reimbursement game or a complex workaround. It’s a compliant, efficient, and cost-free solution that’s already improving the financial and physical health of tens of thousands of employees nationwide.
Employee Benefits That Matter
Core360 was designed with employees in mind. While saving on taxes is important, what really matters is how those savings translate into meaningful, everyday benefits.
Here’s what Core360 offers to your employees:
- 3–4% average increase in net take-home pay (~$100/month)
- $0 copay 24/7 telehealth services
- Wellness tools from Mayo Clinic
- Full access to mental health, addiction, and counseling support
- Coverage for spouses and dependents
- Universal Life, Disability, and Critical Illness benefits
Best of all, employees experience no change in how they currently receive or use their benefits. It’s a behind-the-scenes enhancement with a real, visible impact.
How It Works Behind the Scenes
You might be wondering: How does Core360 use Section 125 eligible expenses and still offer more take-home pay?
Here’s a simplified explanation:
Employees’ pre-tax contributions are redirected through the PCMP and SIMRP components of Core360.
These components cover preventative and routine care, reducing taxable income while increasing benefit utilization.
Because healthcare claims and employer-side taxes go down, both the company and the employee win.
All of this happens with zero disruption, no new costs, and no changes to existing plans or providers.
It’s a quiet, efficient system that delivers big value—fully aligned with IRS regulations and designed to scale.
The Bigger Mission: 250,000 Lives
Health Sphere’s goal is simple: to improve the lives of 250,000 employees by helping companies reduce tax waste and deliver better health outcomes without adding cost. Every Core360 plan implemented moves us closer to that mission.
For employers, it’s about doing right by your team while doing right by your bottom line.
For employees, it’s about better benefits, better health, and more money in their pockets.
And it all starts by understanding and leveraging Section 125 allowable expenses—intelligently, compliantly, and effectively.
Key Takeaways
Section 125 allowable expenses include insurance premiums, prescriptions, co-pays, mental health services, dental care, and more.
These expenses reduce taxable income for employees and payroll taxes for employers.
Core360 from Health Sphere takes Section 125 eligible expenses even further by adding PCMP and SIMRP into a fully managed, cost-free solution.
Employers save ~$600 per W-2 per year and see reduced claims costs.
Employees enjoy a 3–4% paycheck increase, $0 copay telehealth, mental health support, and expanded family coverage.
More than 30,000 employees are already enrolled, benefiting from smarter, tax-advantaged care.
Ready to Improve Benefits Without Adding Cost?
Core360 is built for employers who want better outcomes without disruption, complexity, or expense. It’s time to deliver health and financial wellness in a way that benefits everyone.
Book your 10-minute consultation and get a free proposal today!
