Health Costs Keep Climbing.
Your Benefits Strategy Can Work Harder.
Tax Indemnity is a Section 125 benefits strategy that may reduce employer payroll taxes while giving participating employees added benefits — alongside the health plan you already have.
The Squeeze Every Employer Feels
Rising Premiums
Family coverage averaged nearly $27,000 in 2025, and increases have outpaced wage growth.
Bigger Deductibles
Employees are carrying more of the cost, and they notice it in every paycheck and every medical bill.
Payroll Taxes on Every Hire
Employers pay 7.65% in FICA on every dollar of taxable wages, and it grows as the team grows.
Retention Pressure
When benefits feel thin, good people start looking elsewhere.
Premium and deductible data: KFF 2025 Employer Health Benefits Survey.
What Tax Indemnity Is
Tax Indemnity is a fully insured supplemental benefits plan offered through a Section 125 cafeteria plan. Participating employees pay their premium on a pre-tax basis, which may reduce taxable wages for certain federal employment-tax purposes and create potential payroll-tax savings for the employer.
Depending on the plan, employee benefits may include telemedicine, prescription drug benefits, hospital indemnity, accident and critical illness coverage, and wellness resources. Plan features vary; refer to plan documents for details. Tax Indemnity is supplemental coverage — it is not a replacement for major medical insurance.
Estimated per participating employee / year
Tax Indemnity currently reports average employer savings estimates of approximately $600–$900 per participating employee annually.
Illustrative estimate based on information published by the plan provider. Actual savings vary based on employee participation, payroll, plan structure, eligibility, tax circumstances, and other factors. Savings are not guaranteed.
Built to Stay Out of Your Way
Most owners don't have time for a benefits project. According to Tax Indemnity, its team handles employee enrollment and ongoing administration and works with major payroll systems, so your HR and payroll teams can stay focused on running the business.
How the Section 125 Strategy Works
Employer
Qualifying Employees Participate
Section 125 Pre-Tax Benefit Structure
Reduced Taxable Payroll Where Applicable
Potential Employer Payroll-Tax Savings + Employee Benefits
Section 125 of the Internal Revenue Code allows employers to establish qualifying cafeteria plans through which employees may elect certain benefits on a pre-tax basis. When properly structured and applicable, qualifying salary-reduction contributions generally are not treated as taxable wages for certain federal employment-tax purposes. Tax treatment and savings depend on plan structure, participation, eligibility, payroll, and applicable law.
Reasons Businesses Take a Closer Look
For many employers, payroll and benefits represent two of the largest operational investments. A Section 125 strategy offers a structured way to evaluate whether that spending may work harder for both the business and its people.
Potential Payroll-Tax Savings
A qualifying Section 125 structure may reduce taxable payroll associated with participating employees, potentially reducing applicable employer payroll taxes.
Enhanced Employee Benefits
Provide participating employees access to qualifying benefits available through the applicable program.
Employee Value
A stronger benefits offering can contribute to the overall value employees receive from their employer.
Financial Efficiency
Evaluate whether existing payroll and benefit spending may be structured more efficiently.
Complementary Benefit Strategy
Where appropriate, Tax Indemnity may work alongside an employer's broader benefits strategy.
Value on Both Sides of the Business
The people behind the payroll — the workforce a Section 125 strategy is designed to support.
For the Employer
- Potential payroll-tax efficiency
- Enhanced benefit strategy
- Employee value proposition
- Structured implementation
- Potential cost optimization
For the Employee
- Access to qualifying benefits
- Pre-tax benefit structure where applicable
- Health/wellness support based on the applicable plan
- Additional employer-sponsored value
Frequently Asked Questions About Tax Indemnity
Clear, educational answers regarding Section 125 cafeteria plans and Tax Indemnity.
Looking for R&D Tax Credit Information?
If your business develops, improves, or engineers products, processes, or software, an R&D tax credit evaluation may also be worth exploring.
Explore R&D Tax CreditsRequest Your Tax Indemnity Evaluation
Complete the business evaluation below to help our team understand your payroll structure, workforce size, and existing benefits.
Insurance products are subject to eligibility and plan terms. Savings are estimates and are not guaranteed. SWS does not provide tax or legal advice.