If you’re an employer trying to navigate rising healthcare costs, the IRS Section 125 plan might sound like just another line in the tax code. But dig a little deeper, and you’ll find it’s actually one of the most powerful tools available for reducing payroll taxes, while giving your employees more value, not less.

At Lumara Health, we’ve taken the foundation of the IRS Tax Code Section 125 and built something smarter: the Lumara Plan, a fully managed program that integrates tax savings with modern, family-first benefits, all at no cost to you or your employees.

What Is an IRS Section 125 Plan?

An IRS Section 125 plan, also known as a cafeteria plan, allows employees to pay for qualified medical expenses, like insurance premiums, deductibles, and wellness services, using pre-tax dollars. That means lower taxable income for them, and lower payroll tax obligations for you.

But unlike traditional cafeteria plans, the Lumara Plan goes further. It combines:

• Preventative Care Management Plan (PCMP)
• Specialized Insurance Medical Reimbursement Plan (SIMRP)
  with Section 125 to create a comprehensive, compliant health benefits experience that works for your business, your payroll, and your people.

Why Employers Shouldn’t Overlook the IRS Section 125 Plan

For many employers, benefits often feel like a balancing act: how do you provide meaningful coverage without overwhelming your bottom line? The IRS Section 125 cafeteria plan was designed to solve exactly that problem. By allowing employees to pay for qualified expenses using pre-tax dollars, it reduces taxable income and directly lowers your payroll tax liability. But here’s the catch: while most cafeteria plans stop at basic premium savings, the Lumara Plan takes the framework of Section 125 and transforms it into a complete health and wellness solution.

The real advantage lies in its dual impact. On the employer side, you’re looking at $600–$800 in annual payroll tax savings per W-2 employee. Multiply that across your workforce, and the results speak for themselves: tens of thousands in savings that can be reinvested back into your company. On top of that, healthcare claims can drop by as much as $1,400 per employee over three years, further reducing long-term costs.

For employees, the experience feels nothing like a “tax code benefit” and everything like a modern healthcare upgrade. Instead of seeing deductions, they see a 3–4% net pay increase, roughly $100 extra in their monthly paycheck. They also gain $0 copays for services they actually use, such as telehealth, mental health counseling, prescriptions, and even urgent care. Add in family coverage, wellness tools from Mayo Clinic, addiction recovery support, and stress management programs, and the plan covers the whole household at no extra cost.

When you add it all together, the value is undeniable. The Lumara Plan delivers compliance, tax savings, and a first-class employee benefits experience, without adding a single dollar of cost to your budget. For any employer looking to cut costs while elevating retention, Section 125 isn’t just worth it; it’s a game-changer.

How the Lumara Plan Works for Employers

This isn’t just a tax strategy, it’s a business win.

Here’s what you get with the Lumara Plan:

• Save $600–$800/year per W-2 employee
• Reduce healthcare claims by up to $1,400 over 3 years
• No out-of-pocket implementation cost
• Full compliance with IRS Tax Code Section 125
• Fast, automated rollout in 30–45 days
• Support with payroll integration and onboarding

Whether you’re a small team or a large operation, that adds up quickly. For example, think $60,000+ saved annually for every 100 employees enrolled.

What Your Employees Get At No Cost

While your business benefits from payroll tax savings, your employees get access to one of the most modern benefit experiences available:

• 3–4% Net Pay Increase (~$100/month)
• $0 Copays for Telehealth, Mental Health & RX
• Spouse & Dependent Coverage
• Mayo Clinic Wellness Tools & Facial Scan Dashboard
• EAP, Addiction Recovery & Couples Counseling
• Diet & Stress Programs

And the best part? These benefits extend to their entire household, with no increase in payroll deductions.

Is It Worth It?

In one word: Absolutely.

If you could save thousands per year on payroll taxes while increasing employee satisfaction and retention, with no added cost, why wouldn’t you?

The Lumara Plan makes it simple, seamless, and fully compliant. We take care of all documentation, employee education, and back-end support. You focus on your business, we handle the benefits.

Ready to Unlock the IRS Section 125 Advantage?

With over 60,000 employees enrolled, Lumara Health is transforming the way companies approach benefits. The Lumara Plan offers a smarter, future-ready way to use the IRS Section 125 plan, without the hassle.

Get a free proposal today to see how much you can save while giving your team the wellness benefits they actually want.