Both businesses and workers are worried about the rising expense of health insurance. Every year, premiums go up, deductibles go up, and perks become tougher to pay for. Most firms think they can either switch to a cheaper (and frequently inferior) health plan or ask their workers to pay more. But what if there was an other way?
This is the secret: You may save money without changing your health insurance coverage. You may greatly lower health expenditures for both employers and employees without changing your current coverage by setting up a Section 125 cafeteria structure, especially a compliant and optimal Section 125 benefit plan.
This is the idea behind the Lumara Plan, and it's changing how companies of all sizes save money on healthcare.
The Problem: Great Health Plans, Costs That Can't Last
You want to provide your staff good health care, but it costs you money every year. When premiums go up, you usually have to choose between:
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Moving to a health plan with a lower tier
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Raising the amount of premiums that employees pay
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Taking on the expense and giving up expansion or payroll in other areas
None of them are excellent choices. And even worse, these adjustments often lower morale and the total value of your benefits package.
Most companies don't know that the best way to save money doesn't involve changing your insurance company at all. It merely takes savvy use of IRS Section 125 to make sure that benefits are given and paid for in the best way possible.
What Is a Cafeteria Structure Under Section 125?
The IRS defines a Section 125 cafeteria plan as a way for employees to get tax-free benefits. It lets workers use pre-tax cash to pay for benefits including health insurance premiums, medical reimbursements, and care for dependents.
The main benefit? Pre-tax deductions cut both:
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The employee's taxable income, which raises their take-home money
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The employer's payroll tax bill, which saves them thousands of dollars
But it gets better. A Section 125 benefit plan may do more than just save taxes if it is set in the right way. It may be used to set up tax-free reimbursements that the employer pays for, all without having to spend any more money.
How the Lumara Plan Uses Section 125 to Lower Health Costs
The IRS-approved Section 125 cafeteria structure is the basis for the Lumara Plan, a next-generation benefit solution. It is meant to interact with your existing health insurance, not replace it.
This is how it works:
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Contributions to the Pre-Tax Premium (PCMP)
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Pre-tax deductions take off the employees' part of health insurance premiums. This lowers their taxable income right away and saves the employer 7.65% in payroll taxes (FICA).
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Self-Insured Medical Reimbursement Plan (SIMRP)
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The company utilizes some of the money they save on taxes in step 1 to pay for a unique, tax-free reimbursement plan for their workers. This plan pays for things like co-pays, medicines, and even deductibles that you have to pay for yourself.
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No Change in Insurance Company
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Your health insurance stays the same. You don't have to change providers, renegotiate rates, or move networks.
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No Cost to the Employer Out of Pocket
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We pay for all of the reimbursements using money that would have gone to the IRS as payroll taxes. It is a benefit that pays for itself and does not affect taxes.
What happened? Lower health care expenses for you and your workers, without affecting your current insurance.
Example from Real Life: Saving Without Giving Up
If you own a business with 30 workers, each of whom pays $300 a month for health insurance, That comes to $9,000 a month from employees.
If you use a conventional Section 125 cafeteria plan, you save around $688 a month on payroll taxes for your company (7.65%). By channeling premiums via a pre-tax deduction, you can save $8,250 a year.
The Lumara Plan lets you use some of your $8,250 to pay for regular medical costs without going over your budget. Workers think they're receiving more out of the same plan, and you keep the remainder as pure savings.
And don't forget that the health plan never altered.
Why Employers Like This Method
Businesses would rather use a Section 125 benefit plan structure than make more disruptive adjustments, like moving providers or cutting down on coverage.
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No Changes to Current Coverage
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Employees maintain their health insurance and physicians. There are no problems with HR or awkward transfers.
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Tax Savings Right Now and Over the Long Term
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You start saving money with the first paycheck cycle and keep saving every month.
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No Need to Do Anything Yourself
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Modern plans like Lumara take care of onboarding, payroll integration, compliance paperwork, and claims administration all in one place, so you don't have to give your HR or finance departments more work.
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Improves How Employees See Their Value
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Reimbursement advantages make something seem more valuable without raising gross pay or taxable income.
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No Cost to You
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The Lumara Plan is different from other health or rewards programs since it pays for itself with tax savings, so it doesn't cost you anything.
Built-in Compliance
When you deal with tax-advantaged perks, compliance is always important. The IRS has specific rules that a Section 125 cafeteria plan must follow when it comes to:
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Written plans and documents
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Testing for nondiscrimination
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Benefits and participants who are eligible
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Timing and uniformity of elections
The Lumara Plan contains pre-approved Section 125 plan documentation and takes care of all the paperwork, so you don't have to be a tax expert to stay in compliance.
This is great for small and medium-sized firms who desire all the benefits of a Section 125 benefit plan without taking on any extra risk.
Why This Plan Is Still a Secret
Most company owners and HR professionals don't know how strong Section 125 plans may be, even though they have been legal under the IRS rules for decades. That's partially because:
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A lot of brokers just provide insurance and not tax advice
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Most payroll companies don't help with advanced plan creation
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The advantages are hidden in IRS paperwork that is hard to read
The Lumara Plan makes these hidden funds easier to find and use. It's not just a tax tool; it's a whole employee benefits approach that builds on what you already provide.
In Conclusion: Stick to Your Plan and Save Money
Take a step back if you've been dreading your next health insurance renewal or getting ready for a price increase. You may not need to switch carriers, lower your coverage, or make your team pay for higher expenditures.
Instead, change the way benefits are given out by using a Section 125 cafeteria method. You may cut down on payroll tax waste, boost employee value, and get a better return on your healthcare investment without having to transfer plans if you use a well-designed Section 125 benefit plan like the Lumara Plan.
Want to save money on health care without sacrificing corners? Set up a free consultation to find out how the Lumara Plan can start functioning with your existing benefits in only a few days. It will be compliant, cost-neutral, and hands-off. Visit get started, go visit Lumara Health.
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