1. Compare net savings, not only the headline number
A proposal should distinguish the gross payroll tax reduction from the employer savings after program costs. The employer math is $91.80 in gross monthly payroll tax reduction, less $44 in program administration, leaving $47.80 in net monthly employer savings per participating employee.
2. Understand what employees actually receive
A payroll tax story is not the whole decision. Review what employees see in their pay and what healthcare benefits are included. Concrete care access, prescription benefits, mental health support and navigation are easier to evaluate than a vague promise of “wellness.”
3. Understand the tax treatment
Section 125 is a framework, not a universal tax treatment for every payment. This arrangement uses separate pre-tax and post-tax payroll components, and applicable tax rules determine the treatment of each component. The governing plan documents describe how the components are structured.
4. Understand the “double dipping” concern
“Double dipping” is an informal term often used when the same economic amount appears to receive more than one tax exclusion, such as pre-tax deductions being returned as tax-free cash without an independent basis for that treatment. What matters is whether each component has a separate, supportable tax treatment and documentation. If you want an independent professional review, supporting materials can be provided.
IRS Chief Counsel Memorandum 202323006 examined the tax treatment of certain wellness indemnity payments, including an arrangement involving pre tax premiums. The memorandum is not precedential, but it is one reason careful review of the actual structure matters.
5. Understand payroll and implementation
Implementation is designed to be straightforward. Coordination Group coordinates the payroll census, setup and enrollment steps with the employer, and the required recurring entries are incorporated into the normal payroll process. Complex EIN or payroll structures receive additional review before implementation.
6. Decide what documentation your team needs
You can complete the initial evaluation without adding another party. If you choose to involve a CFO, CPA, payroll leader, benefits Advisor or other professional, the review materials can be matched to the role they are actually reviewing.