Choosing the right healthcare benefit plan is a major challenge for small businesses. They often struggle to find a plan that offers maximum healthcare benefits and pre-tax deductions, with no out-of-pocket cost.
A section 125 benefit plan offers healthcare coverage and pre-tax deductions, but there are associated administrative costs as well. A Lumara Plan offers the benefits of a Section 125 plan and SIMERP with no upfront cost. Let’s explore a Section 125 benefit plan for small business and why employers should choose Lumara Plan over a traditional Section 125 benefit plan.
Understanding the Working of a Section 125 Benefit Plan for a Small Business
A Section 125 benefit plan, also known as a cafeteria plan, allows small businesses to offer employees a choice of pre-tax benefits, such as health insurance, dental and vision coverage, and flexible spending accounts. Under this plan, employees can allocate a portion of their salary before taxes to pay for these benefits, reducing their taxable income and increasing take-home pay. Employers also benefit from this plan by saving on payroll taxes.
The plan must meet IRS requirements and offer a written document outlining available benefits. A Section 125 benefit plan is a tax-efficient way for small businesses to enhance employee compensation and improve benefit offerings.
Different Types of Section 125 Benefit Plan for a Small Business
Section 125 benefit plans come in several forms, each offering flexibility and tax advantages to both employers and employees. Here are the different types of Section 125 benefit plans for small businesses
- Premium Only Plan (POP): This allows employees to pay their portion of insurance premiums (such as health, dental, or vision) with pre-tax dollars, lowering their taxable income.
- Flexible Spending Account (FSA): FSAs let employees set aside pre-tax income to cover eligible healthcare or dependent care expenses, helping them save money on out-of-pocket costs.
- Dependent Care Assistance Plan (DCAP): This type of FSA specifically helps employees cover childcare or dependent care expenses using pre-tax funds, up to the IRS limit.
- Full Cafeteria Plan: A comprehensive plan offering a menu of benefits including health insurance, FSAs, and other voluntary benefits, allowing employees to tailor their benefit package.
- Simple Cafeteria Plan: Designed to ease administrative burden, this version offers safe harbor from certain compliance tests if the employer meets specific eligibility and contribution requirements.
Lumara Plan: Budget-Friendly Section 125 Plan for Small Business
The Lumara Plan by Lumara is a cost-effective Section 125 benefit plan for small business aiming to enhance employee benefits without increasing expenses. By integrating a traditional Section 125 cafeteria plan with a Self-Insured Medical Expenses Reimbursement Plan (SIMERP), Lumara Plan offers a comprehensive, fully managed program.
This structure enables employees to allocate pre-tax earnings toward medical expenses, effectively reducing their taxable income and increasing net pay. With over 40,000 employees enrolled, the Lumara Plan stands out as a practical, budget-friendly strategy for small businesses to improve benefits, boost retention, and achieve immediate financial advantages.
Why Choose Lumra?
Lumara offers a smart, affordable way for small businesses to enhance employee benefits while saving money. Their fully managed Section 125 benefit plan simplifies administration, ensures compliance, and delivers measurable tax savings without changing existing insurance plans. Here is why choose Lumara:
- No out-of-pocket cost for employers
- Savings up to $600 per employee annually
- Assured IRS and ACA compliance
- Boost overall employee well-being and healthcare
Key Employer and Employee Benefits of the Lumara Plan
The Lumara Plan offers a smart, cost-effective way for small businesses to improve their benefits package while saving money. It supports both employers and employees through tax advantages, added services, and seamless integration with existing systems.
Here are the key employer benefits of Lumara Plan:
- Payroll Tax Savings: Employers can save around $600 to $700 per W‑2 employee every year by lowering payroll tax costs through the plan.
- Zero Upfront Costs: There is no need to pay anything to get started, which makes this plan a great option for small and mid-size businesses.
- Easy Implementation: The Lumara Plan works with your existing payroll and benefits systems, so setup is smooth and does not add extra work for your team.
- Compliance Assistance: You get full support to stay compliant with IRS and Department of Labor rules, so there’s nothing to worry about on the legal side.
Here are the key employee benefits of Lumara Plan:
- Increased Take-Home Pay: Employees use pre-tax dollars for eligible expenses, boosting their net income.
- Additional Health Services: Includes access to telehealth, wellness resources, and preventive care tools at no extra cost.
- No Change to Current Insurance: Works alongside existing coverage, requiring no adjustments to employees’ current plans.
- Better Benefit Experience: A more attractive benefits offering improves satisfaction and retention.
Wrapping Up: Why a Section 125 Plan is a Smart Choice for Small Businesses
Launching a Section 125 benefit plan is a smart move for small business owners aiming to offer valuable benefits while reducing tax liabilities. Such plans enhance employee satisfaction by increasing take-home pay and providing flexible benefit options. Among available solutions, the Lumara Plan stands out for its budget-friendly, fully managed approach, requiring no upfront costs and delivering significant payroll tax savings.
With seamless integration and full compliance support, Lumara Plan simplifies the process and boosts employee retention. Choosing Lumara Plan ensures your business gains both financial advantages and a happier, more loyal workforce, making it an ideal partner for your Section 125 benefit plan journey.
