The Pre-Tax PlaybookThe employer's briefing on Section 125 benefits
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FAQ & objections

The hard questions, answered with sources

Required federal noticeFixed indemnity insurance

IMPORTANT: This is a fixed indemnity policy, NOT health insurance

This fixed indemnity policy may pay you a limited dollar amount if you're sick or hospitalized. You're still responsible for paying the cost of your care.

  • The payment you get isn't based on the size of your medical bill.
  • There might be a limit on how much this policy will pay each year.
  • This policy isn't a substitute for comprehensive health insurance.
  • Since this policy isn't health insurance, it doesn't have to include most Federal consumer protections that apply to health insurance.

Looking for comprehensive health insurance?

  • Visit HealthCare.gov or call 1-800-318-2596 (TTY: 1-855-889-4325) to find health coverage options.
  • To find out if you can get health insurance through your job, or a family member's job, contact the employer.

Questions about this policy?

  • For questions or complaints about this policy, contact your State Department of Insurance. Find their number on the National Association of Insurance Commissioners' website (naic.org) under "Insurance Departments."
  • If you have this policy through your job, or a family member's job, contact the employer.
Sounds too good to be true. What's the catch?
It isn't free money. Employees buy real insurance with pre-tax dollars and the carrier pays real benefits; the savings come from how the tax code treats pre-tax health premiums and medical benefits, so the plan has to follow strict rules.[36] The catch is that the IRS has published positions on plans like this, and the value depends on the plan staying on the right side of them.[58, 60]
Isn't this one of those plans the IRS went after?
The IRS has said cash paid for simply completing health activities is taxable wages, and has begun auditing such plans.[58, 60, 61] Elysian's tax counsel says this plan pays only on CPT-coded medical services, not activities.[64] We've requested the written claim-trigger definition so your advisor can confirm which side it falls on.[31]
Is it IRS-approved?
No. The IRS doesn't pre-approve plans like this. What exists is Elysian's written memo from Holland & Knight and the IRS's published positions — we show you both.[64, 55]
What does it cost my company?
Elysian's model is designed so fees come out of the payroll-tax savings. Your Financial Impact Statement shows the projected net after fees from your census; actual results may vary.[35, 34, 67]
What if we get audited?
Elysian states it provides legal defense at no cost, and says the program has been through IRS and NCCI exams with nothing assessed. Per Elysian, documentation available under NDA, pending. Ask for the contract terms, including whether taxes and penalties are covered.[68, 69] Employers can be liable for back taxes, penalties and interest if the IRS disagrees.[63]
Who's behind it? I heard Bain Capital.
Bain Capital holds an indirect economic interest in the parent of Federal Life Group, whose insurance company is one of the carriers Elysian is appointed with. Bain is an investor in the carrier, not the owner of Elysian. Your policy documents name your carrier.[10, 11, 2, 14, 15]
Does it replace our medical plan or affect ACA compliance?
No. It's a supplement. You still offer your ACA-compliant medical coverage.[28, 53]
How much work is it for HR and payroll?
Payroll sets up the pre-tax deduction, passes through the carrier's claim payments and reports them on the W-2.[32] Employees get notice and an easy opt-out.[45] Plan documents (Section 125, SPD) are provided per Elysian.[46, 54]
Who qualifies?
W-2 employees earning enough each week for the deduction to work in their favor (about $240+/week per Elysian); some owners, partners and 1099s can't participate pre-tax.[43, 44]
Can employees be hurt by this?
Payments above an employee's actual medical costs may be taxable to them; lower Social Security wages can slightly lower future benefits; and elections are generally locked for the plan year. Per one client's materials, employees are auto-enrolled only if their take-home pay is higher.[39, 43]
Why haven't I heard of Elysian?
It's a specialist firm: a licensed agency appointed with two carriers, founded by a 25-year benefits veteran.[2, 3]
My CPA or counsel needs to review it.
Good — they should. Send them the proof page and ask them to compare the Holland & Knight memo with IRS CCA 202323006.[64, 58]
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