Each year, companies lose thousands of dollars in tax savings potential due simply to a lack of knowledge of better, compliant strategies to mitigate tax burdens and enhance employee benefits. Perhaps one of the most underserved tools is the IRS Section 125 cafeteria plan—a very powerful tool that enables employees to use pre-tax dollars to pay for specific benefits, lowering employers’ aggregate payroll taxes.
But here’s the truth: not all Section 125 plans are created equal. And most importantly, not all employers are aware of how to maximize the potential of these plans.
At BrightPath, we assist businesses in breaking through the din and the confusion with a simplified, compliant option: the BrightPath Advantage. This isn’t an old-style cafeteria plan—it’s a contemporary, fully managed solution that combines IRS Section 125 cafeteria plan rules with a Preventative Care Management Plan (PCMP) and a Self-Insured Medical Reimbursement Plan (SIMRP). The outcome? One of the most benefit-rich, cost-free programs on the market today.
Let’s dissect.
What is an IRS Section 125 Cafeteria Plan?
A Section 125 cafeteria plan—alternatively referred to as a “pre-tax benefits plan”—is a benefit plan that permits employees to elect between taking taxable compensation (such as salary) or non-taxable benefits such as health coverage, dependent care assistance, or health savings accounts (HSAs).
When it’s set up properly, an IRS Section 125 cafeteria plan saves employers payroll taxes and federal income and FICA taxes for employees. That’s a win-win situation.
However, complying with Section 125 cafeteria plan rules is more than signing a couple of forms—it needs a compliant design, consistent management, and precise coordination with other benefits.
That’s where BrightPath Advantage steps in.
Why BrightPath Advantage Stands Out
The BrightPath Advantage plan is not merely about IRS compliance—it’s about creating a wiser, more sustainable solution for maintaining your workforce and safeguarding your bottom line.
Our solution comes with an entirely compliant Section 125 structure but extends beyond by incorporating:
- Preventative Care Management Plan (PCMP)
- Self-Insured Medical Reimbursement Plan (SIMRP)
Our combined format enables us to provide a turnkey solution that assists businesses in:
- Lowering payroll tax burdens by $600–800 per employee annually
- Increase employee benefit options at no cost
- Take effect in as few as 30–45 days
- Increase retention, morale, and performance
- Make an immediate and sustained bottom-line impact
And yes, no change to your current health plan, no out-of-pocket expenses, and no additional administrative hassle.
Section 125 Cafeteria Plan Requirements (Simplified)
To open the tax-savings potential of a Section 125 cafeteria plan, it needs to satisfy certain IRS requirements. We won’t burden you with jargon, but here are the basics all employers need to know:
1. A Written Formal Plan Document
The IRS demands a written plan that identifies:
- The benefits provided
- Rules for eligibility
- How elections are made and how they can be changed
- The effective date of the plan
With BrightPath Advantage, all paperwork is professionally handled and fully compliant, off your plate completely.
2. Qualified Benefits
Certain benefits are eligible under an IRS Section 125 cafeteria plan. These are:
- Group health insurance premiums
- Health savings accounts (HSAs)
- Dependent care assistance
- Vision and dental plans
- Group-term life insurance (up to limits)
Our plan takes advantage of these qualified benefits in combination with other tax-free health enhancements offered through our SIMRP and PCMP layers.
3. Uniform Coverage and Non-Discrimination Rules
The IRS mandates Section 125 plans abide by non-discrimination regulations, so they don’t unfairly benefit highly compensated employees. The BrightPath Advantage is designed from the ground up to meet all discrimination testing and provide fairness throughout your workforce.
4. Annual Election Periods
Employees need to make elections on an annual basis (or upon a qualifying life event). Our platform does this automatically, so your HR department doesn’t have to do it manually.
Employer Benefits with BrightPath Advantage
Here’s what employers get out of using the BrightPath Advantage:
- Save $600–800 per W2 employee per year in payroll taxes
(That’s $68,000 per 100 employees—without doing a thing.)
- No out-of-pocket cost to implement or maintain
(We do it all.)
- 30–45 day implementation window
(Speedy, hassle-free onboarding for HR teams.)
- Immediate bottom-line impact
(Savings appear quickly and keep coming year after year.)
- Reduced healthcare claims
(Average savings of $1,400 over 3 years.)
- Improved employee performance & retention
(Employee retention and morale are boosted.)
(Fully supported, employees remain with the company.)
Employee Benefits Without Cutting Into Paychecks
BrightPath Advantage was created to bring value to your employees—without cutting into their take-home pay or interfering with existing benefits.
Employees receive access to:
- $0 copay 24/7 Telehealth services
- Addiction, counseling, and mental health support
- Mayo Clinic wellness dashboard and digital health applications
- Critical Illness, Disability, and Universal Life Insurance
- Spousal and dependent coverage options
- Transparent, no-hidden-costs policy
All this without altering existing coverage and without payroll deductions other than pre-tax benefit contributions.
Why BrightPath?
BrightPath assists employers in taking a clearer, smarter path to providing actual employee benefits—without the typical complexity, expense, or confusion.
We’ve built the BrightPath Advantage plan to help employers meet IRS Section 125 cafeteria plan requirements while also unlocking modern, powerful health and wellness benefits. It’s one of the most compliant and benefit-rich solutions available—and it’s fully managed from end to end.
We’re already helping over 30,000 employees access better care while helping businesses put thousands of dollars back into their budgets.
A Real-World Example
Imagine you’re a company with 150 employees.
With BrightPath Advantage, you might save up to $90,000-$120,000 annually in payroll taxes.
Your workers would become eligible for dynamic health tools and protections—without sacrificing a dollar in take-home pay.
And you wouldn’t have to adjust your existing insurance carrier or plan.
That’s the kind of win-win that we think all businesses should deserve.
Your Path to Smarter Benefits Starts Here
Whether you’re a CFO seeking bottom-line savings or an HR leader wanting to upgrade your benefits package without additional expense, BrightPath Advantage is designed to help you succeed on both counts.
Ready to move forward?
BrightPath provides a compliant, cost-neutral, and fully managed plan that utilizes Section 125, PCMP, and SIMRP to achieve real results.
Schedule your 10-minute consultation and receive a free proposal today!
Because doing good for your employees shouldn’t equate to doing bad for your margins.
