In the competitive workforce of today, employers are continually seeking better, more economical means of benefiting their employees. One such area that tends to go underappreciated? Payroll tax strategy. That is, how employers approach employee benefit deductions—whether they’re implementing post-tax deductions or taking advantage of Section 125 taxes via payroll pre tax deductions. At first glance, this may seem like boring accounting. But in actuality, this decision can make tens (or even hundreds) of thousands of dollars’ worth of difference per year. Most importantly, it can really help the bottom line of your employees’ financial well-being, without increasing cost or altering your current health plan configuration.

Let’s break it down in simple English: What’s the actual difference between post-tax deductions and Section 125? And why is the Lumara Plan a wiser, fully compliant solution that produces significant results behind the scenes?

What Are Payroll Pre Tax Deductions?

Payroll pre tax deductions are amounts deducted from an employee’s paycheck prior to taxes being withheld. This can include such things as healthcare premiums, health savings accounts (HSAs), dependent care, and other qualified benefits. When these deductions are made pre-tax through a Section 125 health plan, it lowers the employee’s taxable income—and the employer’s payroll tax liability.

What Are Post-Tax Deductions?

Post-tax deductions are taken after income taxes are calculated. Common examples include retirement contributions outside of a 401(k), some insurance premiums, and union dues. These deductions don’t offer tax savings to the employee or the employer.

Section 125 Taxes: The Game Changer

Now let’s discuss the actual opportunity—Section 125 taxes. When employers provide a Section 125 health plan, they permit employees to cover benefits such as health insurance and wellness tools using pre-tax dollars. But the Lumara Plan does more than that.

It doesn’t simply feature Section 125. It also incorporates:

• Preventative Care Management Plan (PCMP)

• Self Insured Medical Reimbursement Plan (SIMRP)

This pairing forms a strong, completely managed solution that is among the most compliant and richest in benefits of any program offered today.

Why The Lumara Plan Is Superior To Traditional Section 125

Traditional Section 125 plans provide some savings, but the Lumara Plan adds value in three significant ways:

• Tax Savings for Employers: Employers save on average ~$600 per W2 per year—that’s $60,000 for each 100 employees covered.
• Increased Take-Home Pay for Employees: Employees get to enjoy an extra 3–4% increase in their net paycheck, up to ~$100/month.
• No Extra Cost or Changes to Plans: It complements your current benefit packages with no disruption and no out-of-pocket cost.

Section 125 vs. Post-Tax Deductions: A Side-by-Side Comparison

Here’s how it compares:

 

Feature	Post-Tax Deductions	Section 125 + Lumara Plan
Payroll Tax Savings for Employer	None	~$600 per employee per year
Employee Take-Home Pay	No increase	+3–4% (~$100/month)
Eligible Benefits	Limited	Telehealth, wellness tools, life/critical care
Copays for Employees	Standard	$0 for Telehealth, Mental Health, Wellness
Compliance & Automation	Manual, employer-led	Fully managed, automated, 30–45 day rollout
Out-of-Pocket Cost to Employer	Varies	$0
Impact on Existing Benefits	May require changes	No changes required
Enrollment Flexibility	Limited	Fully flexible, spouse & dependent coverage

 

Why Post-Tax Deductions Are Holding You Back

Post-tax deductions may seem “safer” because it’s what you’re used to. But it’s costing you more than you realize.

Here’s why:

• You’re paying unnecessary payroll taxes on income that could legally be excluded.

• Employees miss out on real tax savings and added benefits.

• There’s no added value for retention or performance.

It’s a missed opportunity to modernize your benefits without added costs.

The Lumara Plan: A Win-Win for Employers & Employees

Lumara was designed around one simple idea: employers and employees alike deserve better. Each year, companies inadvertently throw away thousands of dollars’ worth of payroll taxes, while their workers are missing out on important, tax-free health benefits.

What employers receive with the Lumara Plan:

• ~$600 per W2 employee in payroll tax savings annually

• No out-of-pocket expense

• Lower claims (average of $1,400 in savings over three years)

• Quick, streamlined implementation (30–45 days)

• Enhanced retention, performance, and job satisfaction

• Direct bottom-line impact 

And for workers, the plan provides:

• 3–4% net pay boost (~$100/month)

• $0 copay 24/7 Telehealth (physicians, nurses, coaching)

• Mayo Clinic wellness tools and health dashboard access

• Mental health, addiction, and counseling services

• Life, disability, and critical illness protection

• Spouse and dependent upgrades

Over 40,000 staff are currently participating in the Lumara Plan, and the figure keeps increasing because the outcomes speak for themselves.

Compliance, Without The Complexity

The largest reason companies avoid change is fear of complexity or compliance problems. That’s where Lumara shines.

Our completely managed plan is:

• Legally compliant with all IRS Section 125 plan regulations

• Supported by industry professionals and compliance specialists

• Hands-off for HR and payroll staff

• Smooth to fit with your current payroll system

There is no guesswork, no administrative hassle, and no danger to your existing benefits or providers.

What Goes On Behind the Scenes?

Here’s the good news: the savings and benefits are generated through subtle, behind-the-scenes changes in how payroll deductions are managed. Rather than requiring employees to contribute dollars after they’ve paid taxes, a segment of their pay is moved into tax-free benefits through the use of Section 125 paired with our PCMP and SIMRP designs.

What that equates to:

• The employer lowers taxable wages and saves on payroll taxes

• The employee reduces their tax burden and enjoys higher take-home pay

• The benefit experience is enhanced, without additional spend

It all happens quietly, compliantly, and without anybody missing a beat.

Key Takeaway: Post-Tax Is Old News. The Lumara Plan Is The Wave Of The Future

In a day and age when every dollar is important, both to business owners and employees alike, to continue using post-tax deductions is like leaving money on the table. The Lumara Plan takes advantage of Section 125 taxes in conjunction with a completely managed PCMP and SIMRP to provide real savings, real benefits, and real peace of mind.

Whether you’ve got 100 employees or 10,000+, the results are scalable, measurable, and long-lasting.

You should be able to get a smarter, more contemporary approach to supporting your team, without additional effort or cost.

Want to stop wasting money and optimize your payroll deductions?

Schedule your 10-minute consultation today!