A Practical Problem for Small Firms
A common problem for small firms in the U.S. is how to provide useful health benefits without going over budget. Most of the time, traditional group insurance plans have high rates and little choices for changing them. But with the correct framework, health benefits might have a bigger effect and cost less.
That’s where the Lumara Plan comes in. It is based on a Section 125 plan for small businesses and includes a significant cost-saving option called the self-insured medical expenditure reimbursement plan. This helps companies lower their tax bills while still offering workers meaningful, flexible health care coverage.
What is a Section 125 Plan for Small Businesses?
A cafeteria plan, or Section 125 plan, lets workers use section 125 pre tax deductions for health services that qualify. This implies that their taxable income falls lower, which means they get to keep more of their money. Employers also save money on payroll taxes like FICA and FUTA.
The Lumara Plan builds on this idea by using Section 125 criteria and a more personalized approach to health care reimbursement. It offers small companies the tools they need to establish a benefits plan that is both tax-efficient and good for employees.
What is a Plan for Reimbursing Medical Expenses That You Pay for Yourself?
Employers may use tax-free money to pay back workers for eligible out-of-pocket medical expenditures via a self-insured medical expense reimbursement plan. Some of these charges are:
- Deductibles
- Copays
- Medications that are prescribed
- Care for teeth and eyes
- Services for mental health
The company pays for this plan in whole, with each employee making a predetermined monthly amount. Employees don’t have to pay taxes on these reimbursements if they are set up under a compliant Section 125 plan. Employers may also fully deduct the costs from their taxes.
The Lumara Plan makes this framework easier to understand, which helps companies provide compliant, trackable reimbursements while saving the most money on taxes.
How the Lumara Plan Brings These Structures Together
The Lumara Plan is designed for small to medium-sized businesses who desire to get away from the limits of typical group health plans. Lumara offers the following by combining a Section 125 plan with a self-insured medical expenditure reimbursement plan:
- Tax breaks for the company
- Health benefits for workers that are tax-free
- A solution that is compliant and completely managed
- Monthly expenditures that are clear and easy to understand
A single platform handles everything about the plan, from qualifying documentation to processing reimbursements. This makes it easier for small firms to maintain without hiring extra HR staff.
1. Immediate Payroll Tax Savings for Employers
The company saves around 7.65% in FICA taxes for every dollar workers spend before taxes using the Section 125 arrangement. For instance:
- 20 workers
- $5,000 a year in eligible costs for each employee
- $100,000 in perks before taxes
- $7,650 less in payroll taxes for the employer each year
As more people join, these savings might become a lot.
2. Costs That Are Easy to Plan For and Control
With the Lumara Plan, each employee’s firm makes a predetermined monthly payment. There are no unexpected rate increases or surprises when you renew. This makes it possible to make realistic yearly budgets, even while the health care market is changing.
3. Employee Benefits That Are Competitive Without Extra Costs
Instead of spending hundreds of dollars in group health premiums for each employee, firms set up a self-insured medical expenditure reimbursement plan that only pays out when workers require treatment. This makes every dollar work harder.
4. Complying With All IRS and ERISA Rules
Section 125 and medical reimbursement programs have to meet tight standards set by the IRS and ERISA. Employers are safe since Lumara takes care of all compliance tasks, such as:
- Plan paperwork
- Nondiscrimination testing
- HIPAA precautions
- ACA reporting
Benefits of the Lumara Plan for Employees
1. More Money in Your Pocket
Employees decrease their taxable income by utilizing pre-tax cash to pay for medical expenses. This means that less money is taken out of their paychecks for taxes, so they have more money for what they really need.
2. Paying Back Real-Life Costs
Instead than paying premiums for services they may never use, workers get money back for health care costs they actually have, such doctor visits, medications, lab work, therapy, and more.
3. No Surprises About Deductibles or Copays
Employees get instant benefit from reimbursements since they go straight to out-of-pocket costs. There are no complicated network restrictions or hidden copays, just actual compensation.
4. Easy to Understand and Use
Employees may file claims online using a secure site, keep track of their balance, and get immediate reimbursements. This makes the benefits experience straightforward and powerful.
The Lumara Plan: Why Small Businesses Are Choosing It
The Section 125 plan for small businesses has mostly been about flexible spending accounts or plans that just cover premiums. But old methods don’t meet the demands of today’s employers and employees and don’t save on taxes.
The Lumara Plan bridges that gap by bringing together:
- Pre-Tax benefit deductions for Section 125
- Medical expenses paid for by the employer
- Managing compliance from start to finish
- Design a custom strategy for every size company
This makes for a unified strategy that saves more money on taxes, decreases the cost of benefits, and gives workers better care assistance.
Example From the Real World
The Lumara Plan replaces a $500/month premium group plan for a firm with 40 employees. Instead of spending $240,000 in premiums per year:
- The firm puts $200 a month into each employee’s medical reimbursement account, which adds up to $96,000 a year.
- Section 125 savings save payroll taxes by more than $7,000 a year.
- Employees get money back for genuine costs like medicines, physical therapy, and dental care.
- The organization saves more than $140,000 and keeps more employees happy and loyal.
Flexibility Built In for Any Business
The Lumara Plan may work in any setting, whether it’s a construction business, a professional services organization, or a store. It works for startups that want to provide benefits for the first time since there is no minimum group size and financing alternatives are available.
- Businesses switching from group plans with high costs
- Businesses who want to retain more customers and spend less on expenses
And since Lumara works well with most payroll systems, onboarding goes smoothly.
Final Thoughts
One of the best and cheapest methods to help people with their health care costs right now is to combine a self-insured medical expenditure reimbursement plan with a compliant Section 125 plan for small businesses. The Lumara Plan makes this approach easier to understand by turning it into a ready-to-use solution that offers clarity, savings, and value.
Employers get predictable prices and tax savings right away. Employees have more freedom, openness, and substantial reimbursements. In the end, both parties gain from a framework that is meant to last.
Learn how the Lumara Plan may change the way your health benefits work. With wiser tax savings, compliance administration, and a better approach to care for your workforce, your firm can grow.