Tax Savings for Employers Section 125 plans allow businesses to save Social Security (FICA), as well as federal unemployment taxes (FUTA) and generally, state unemployment taxes, on the money employees contribute to a Flex or Premium Only Plan. Employer tax savings can average 7 to 10 percent of employees' contributions. (A tax advisor should be consulted for information on individual state regulations.)  EXAMPLE: An employer shows 20 employees, each contributing $1,200 in pre-tax medical contributions annually.  Pre-tax medical contributions: $ 1,200 Number of employees:  x 20 Total employee contributions: $24,000 FICA factor: x .0765 Estimated annual FICA savings: $ 1,836 In most situations the amount of taxes saved by the employer will offset the actual cost of the plan to the employer. Even it the tax savings did not totally offset the cost it will reduce it.