# The Pre-Tax Playbook > Independent, footnoted explainer on Section 125 pre-tax fixed hospital indemnity programs, specifically the program offered through Elysian Healthcare LLC, for U.S. employers with 100+ employees (PEOs and brokers secondary). Operated by Pre-Tax Playbook, a division of Seven16 Group LLC (325 Adams Drive #504, Weatherford, TX 76087). Not tax or legal advice. Not Elysian's official website. Every claim on the site links to a source on the Proof page, labeled Verified, Elysian-stated, Pending (documents requested) or Analysis. Last reviewed: 2026-11-12. Please cite the specific page URL. For the complete text with sources, see https://pretaxplaybook.com/llms-full.txt. ## Knowledge base (start here) - [Guide index](https://pretaxplaybook.com/guide/): glossary and overview - [Section 125 cafeteria plans: the basics](https://pretaxplaybook.com/guide/section-125-basics.html): What a cafeteria plan is, who can use it, and the paperwork it needs. - [Fixed hospital indemnity: what it is and isn't](https://pretaxplaybook.com/guide/fixed-hospital-indemnity.html): A fixed dollar benefit, not health insurance. How it fits next to major medical. - [FICA and payroll tax mechanics](https://pretaxplaybook.com/guide/fica-payroll-tax-mechanics.html): How pre-tax premiums change FICA, FUTA and take-home pay, with formulas. - [The lines the IRS has drawn](https://pretaxplaybook.com/guide/irs-lines.html): The memos, rules and audits that decide whether a plan works, in date order. - [Worked examples (illustration only)](https://pretaxplaybook.com/guide/examples.html): Employer and employee math with every assumption labeled. - [Guide FAQs](https://pretaxplaybook.com/guide/faqs.html): Short, sourced answers to the questions buyers and researchers ask most. ## Core pages - [Home: the story, the math and the IRS lines](https://pretaxplaybook.com/) - [How it works, step by step](https://pretaxplaybook.com/how-it-works.html) - [Proof & compliance: the full claim register with sources and status labels](https://pretaxplaybook.com/proof.html) - [Employer payroll tax estimate (illustration)](https://pretaxplaybook.com/calculator.html) - [FAQ & objections](https://pretaxplaybook.com/faq.html) - [For CFOs & shareholders](https://pretaxplaybook.com/cfo.html) - [For owners](https://pretaxplaybook.com/owner.html) - [For HR & recruiting](https://pretaxplaybook.com/hr.html) - [For PEOs & brokers](https://pretaxplaybook.com/peo.html) - [Broker notes](https://pretaxplaybook.com/brokers.html) - [The CFO's Due-Diligence Kit (email-gated PDF)](https://pretaxplaybook.com/kit.html) # Full guide text ## Section 125 cafeteria plans: the basics URL: https://pretaxplaybook.com/guide/section-125-basics.html How pre-tax premiums work, who can use them, and the paperwork that keeps them pre-tax. Section 125 cafeteria plan (noun): a written employer plan under Internal Revenue Code §125 that lets employees choose between taxable cash pay and certain qualified benefits, paying for those benefits with pre-tax salary reductions. What a cafeteria plan does A cafeteria plan lets an employee pay certain benefit premiums out of gross pay, before taxes. The salary reduction used to buy health coverage isn't included in the employee's gross income.[1] Premiums paid that way for accident or health insurance are excluded from income under Section 106.[2] The result: taxable wages go down, so the employee owes less income tax and FICA, and the employer owes less FICA on those dollars.[1, 3] It has to be a written plan, run the way it's written Pre-tax treatment depends on a written cafeteria plan, consistent elections and proper operation, including nondiscrimination testing.[4] Plans with 100 or more participants generally also carry ERISA paperwork, such as a summary plan description and possibly Form 5500 filings.[5] Who can participate pre-tax Only W-2 employees can pay pre-tax. Partners, more-than-2% S-corporation shareholders and 1099 contractors are treated differently.[6] In the program this site covers, not every employee qualifies. Employees must earn enough each week for the deduction to work in their favor, and Elysian screens each employee. In Elysian's case data, roughly 60–80% of a workforce qualified.[7] Elections are usually locked for the plan year Under Section 125, elections are generally irrevocable for the plan year unless the employee has a qualifying change in status. One client's authorization form for this program calls the election “irrevocable” for the plan year.[8] Employees should get advance notice and an easy opt-out before coverage starts.[9] What Section 125 does not decide Section 125 settles how the premium is taxed. It doesn't decide how benefit payments are taxed. Sections 105 and 104 govern that, and it's where the IRS has drawn its lines on fixed indemnity plans paid pre-tax.[10, 11] Read FICA and payroll tax mechanics and The lines the IRS has drawn next. Key takeaways Pre-tax premiums through a written §125 plan are standard and well established.[1] Only W-2 employees can participate, and not every employee benefits.[6, 7] The hard question is how the benefit payments are taxed, not the premium.[10] Sources: [1] Step 1 — pre-tax premium through a Section 125 cafeteria plan (Verified). https://www.irs.gov/pub/irs-wd/202323006.pdf https://www.jobsrus.com/contractor/ElysianAuthorizationForm.pdf | https://pretaxplaybook.com/proof.html#P-30 [2] Section 106: pre-tax health premiums are excluded from income (Verified). https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage | https://pretaxplaybook.com/proof.html#P-47 [3] Employer FICA is 7.65% for most hourly workers (Verified). https://www.ssa.gov/faqs/en/questions/KA-02387.html https://www.irs.gov/taxtopics/tc751 | https://pretaxplaybook.com/proof.html#P-40 [4] Section 125 requires a written cafeteria plan (Verified). https://elysiandealer.com/faqs/ | https://pretaxplaybook.com/proof.html#P-46 [5] ERISA documents (Elysian-stated). https://elysiandealer.com/faqs/ | https://pretaxplaybook.com/proof.html#P-54 [6] Only W-2 employees participate pre-tax (Verified). https://elysiandealer.com/faqs/ | https://pretaxplaybook.com/proof.html#P-44 [7] Not everyone qualifies (Elysian-stated). https://www.jobsrus.com/contractor/JRU_Flyer_English_2025.pdf | https://pretaxplaybook.com/proof.html#P-43 [8] What employees should know (Analysis). https://www.jobsrus.com/contractor/ElysianAuthorizationForm.pdf | https://pretaxplaybook.com/proof.html#P-39 [9] Notice and easy opt-out (Elysian-stated). https://www.jobsrus.com/contractor/JRU_Flyer_English_2025.pdf | https://pretaxplaybook.com/proof.html#P-45 [10] Section 105(b): benefits are tax-free only to reimburse real medical expenses (Verified). https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage https://www.irs.gov/pub/irs-wd/202323006.pdf | https://pretaxplaybook.com/proof.html#P-48 [11] CCA 202323006 — the key IRS memo (Verified). https://www.irs.gov/pub/irs-wd/202323006.pdf | https://pretaxplaybook.com/proof.html#P-58 ## Fixed hospital indemnity: what it is and isn't URL: https://pretaxplaybook.com/guide/fixed-hospital-indemnity.html A fixed dollar benefit that sits next to major medical. Here's what that does and doesn't mean. Fixed hospital indemnity insurance (noun): insurance that pays a set dollar amount when a covered event happens, such as a hospital admission or a day in the hospital, regardless of the size of the medical bill. What it is A policy that pays a fixed dollar amount on a covered event, not a share of the bill.[1, 2] In the program this site covers, the hospital benefit comes with $0-copay virtual urgent care, primary care, behavioral health and generic prescriptions (Elysian-stated; amounts vary by plan).[3, 4, 5, 6, 7] Sold as a supplement that sits next to an employer's major medical plan.[8] Elysian states the coverage is fully insured by a licensed carrier, not self-funded by the employer.[9] Elysian is a licensed producer appointed with Federal Life and U.S. Fire, and your policy documents name the issuing carrier.[10, 11] What it isn't Not health insurance. It doesn't pay based on your bill, may cap payments, and doesn't carry most federal consumer protections. That's why a federal notice must appear on marketing materials.[2] Not a substitute for major medical. Employers with 50+ full-time-equivalent employees still face the ACA employer mandate, and hospital indemnity doesn't count toward it.[12] Not “free money.” Employees pay a real premium and the carrier pays real claims. The net gain comes from taxes that aren't paid, so it depends on the tax treatment being right.[13] The “excepted benefit” rules A group hospital indemnity policy avoids full ACA health-plan rules only if it's offered independently of the employer's health plan and, in the group market, pays a fixed dollar amount per day or other period of hospitalization or illness, not per service.[2] For plan years beginning on or after January 1, 2025, a federal fixed indemnity notice must appear prominently on the first page of marketing, application and enrollment materials, including websites, in at least 14-point type.[2] That's the notice you see near the top of every page on this site. Why “pre-tax” changes everything Most hospital and fixed indemnity premiums are paid after tax, and when they are, benefits are generally not taxable.[14] When premiums are paid pre-tax, benefits are tax-free only to the extent they reimburse real, unreimbursed medical expenses under Section 213(d).[1, 15] The pre-tax choice creates both the savings and the IRS scrutiny. See The lines the IRS has drawn. Key takeaways Fixed indemnity pays set amounts. It isn't health insurance.[2] It supplements ACA-compliant major medical and never replaces it.[12, 8] Paying premiums pre-tax moves the tax question to the benefit payments.[1, 14] Sources: [1] Section 105(b): benefits are tax-free only to reimburse real medical expenses (Verified). https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage https://www.irs.gov/pub/irs-wd/202323006.pdf | https://pretaxplaybook.com/proof.html#P-48 [2] Fixed indemnity rules: excepted benefits and the required notice (Verified). https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage | https://pretaxplaybook.com/proof.html#P-52 [3] Hospital indemnity cash benefits (Elysian-stated). | https://pretaxplaybook.com/proof.html#P-20 [4] $0-copay virtual urgent care (Elysian-stated). https://www.jobsrus.com/contractor/JRU_Flyer_English_2025.pdf | https://pretaxplaybook.com/proof.html#P-21 [5] $0-copay virtual primary care (Elysian-stated). https://www.jobsrus.com/contractor/JRU_Flyer_English_2025.pdf | https://pretaxplaybook.com/proof.html#P-22 [6] $0-copay virtual behavioral health (Elysian-stated). https://www.jobsrus.com/contractor/JRU_Flyer_English_2025.pdf | https://pretaxplaybook.com/proof.html#P-23 [7] $0-copay generic prescriptions (Elysian-stated). | https://pretaxplaybook.com/proof.html#P-24 [8] A supplement — it does not replace major medical (Verified). https://www.jobsrus.com/contractor/JRU_Flyer_English_2025.pdf | https://pretaxplaybook.com/proof.html#P-28 [9] Fully insured — not self-funded by your company (Elysian-stated). | https://pretaxplaybook.com/proof.html#P-19 [10] Elysian is a licensed insurance agency appointed with two carriers (Verified). https://di.nv.gov/nv/r/doi/licensing/5?p5_agy_org_id=182724&clear=RP | https://pretaxplaybook.com/proof.html#P-2 [11] Which carrier issues the policy (Pending NDA doc). | https://pretaxplaybook.com/proof.html#P-14 [12] The ACA employer mandate still applies (Verified). https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions | https://pretaxplaybook.com/proof.html#P-53 [13] It's not free money (Analysis). | https://pretaxplaybook.com/proof.html#P-36 [14] Section 104(a)(3): the after-tax alternative (Verified). https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage | https://pretaxplaybook.com/proof.html#P-49 [15] Section 213(d): what counts as medical care (Verified). https://www.irs.gov/individuals/frequently-asked-questions-about-medical-expenses-related-to-nutrition-wellness-and-general-health | https://pretaxplaybook.com/proof.html#P-50 ## FICA and payroll tax mechanics URL: https://pretaxplaybook.com/guide/fica-payroll-tax-mechanics.html Where the payroll tax savings come from, the formulas, and the one step that decides whether they hold. The payroll taxes involved | | Tax | Employer rate | Wage base (2026) | Social Security (OASDI) | 6.2% | First $184,500 of wages | Medicare (HI) | 1.45% | All wages | Total employer FICA, most hourly workers | 7.65% | See above | FUTA | 6.0% (usually 0.6% after state credit) | First $7,000 Employees pay the same 7.65% FICA on their side.[1] Step 1: the pre-tax premium lowers taxable wages When an employee pays a premium through a Section 125 plan, that amount comes out before taxes, so neither side pays income tax withholding or FICA on it.[2, 3] This step is standard, and the IRS agrees with it.[2] Employer FICA reduction per enrolled employee, per year = monthly pre-tax premium × 12 × 7.65%Before program fees, for employees under the Social Security wage base, and only if benefit payments aren't treated as wages.[4] Step 2: how benefit payments are taxed decides the outcome In this design the carrier funds each claim payment and payroll passes it to the employee (Elysian-stated).[5] Elysian's tax counsel concluded that the payments are not wages.[6] The IRS Chief Counsel has taken a different written position: when an employee has no unreimbursed medical expense related to the payment, wellness-style indemnity payments under a pre-tax policy are taxable wages for FICA, FUTA and income tax withholding.[7, 8] This is a direct disagreement, and the employer carries the withholding and FICA risk.[8, 9] Step 3: the employee's take-home formula Change in monthly take-home pay = claim payments received − premium deducted + (premium × employee's combined tax rate)[10] The employee comes out ahead only if the plan pays a claim close to the premium nearly every month. That monthly pattern is exactly what the IRS has questioned, which is why we show the formula instead of a promise.[10, 11] See the worked examples. Other effects to know California workers' comp: qualifying Section 125 benefit deductions are excluded from workers' comp payroll if the employer keeps per-employee records, so premiums may drop. Outside California, don't assume a workers' comp saving.[12] Future Social Security: lower Social Security wages can mean slightly lower future benefits.[13] Fees: program fees are disclosed in the Financial Impact Statement. Compare them with the FICA reduction.[14] Downside: if the IRS disagrees, the employer can owe under-withheld income tax, both halves of FICA, FUTA, penalties and interest.[9] Sources: [1] Employer FICA is 7.65% for most hourly workers (Verified). https://www.ssa.gov/faqs/en/questions/KA-02387.html https://www.irs.gov/taxtopics/tc751 | https://pretaxplaybook.com/proof.html#P-40 [2] Step 1 — pre-tax premium through a Section 125 cafeteria plan (Verified). https://www.irs.gov/pub/irs-wd/202323006.pdf https://www.jobsrus.com/contractor/ElysianAuthorizationForm.pdf | https://pretaxplaybook.com/proof.html#P-30 [3] Section 106: pre-tax health premiums are excluded from income (Verified). https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage | https://pretaxplaybook.com/proof.html#P-47 [4] Employer FICA savings — how to estimate (Analysis). | https://pretaxplaybook.com/proof.html#P-41 [5] Step 4 — the carrier funds the claim; payroll passes it through (Elysian-stated). | https://pretaxplaybook.com/proof.html#P-32 [6] Step 5 — Elysian's counsel: claim payments are not wages (Elysian-stated). | https://pretaxplaybook.com/proof.html#P-33 [7] CCA 202323006 — the key IRS memo (Verified). https://www.irs.gov/pub/irs-wd/202323006.pdf | https://pretaxplaybook.com/proof.html#P-58 [8] FICA: the point where Elysian's counsel and the IRS disagree (Verified). https://www.irs.gov/pub/irs-wd/202323006.pdf | https://pretaxplaybook.com/proof.html#P-51 [9] What's at stake if the IRS disagrees (Verified). https://www.morganlewis.com/blogs/mlbenebits/2026/09/what-goes-around-irs-audits-of-fixed-indemnity-health-wellness-benefit-plans-that-offer-purported-tax-savings https://news.bloombergtax.com/tax-management-memo/hr-solutions-that-become-tax-problems-how-to-minimize-risk | https://pretaxplaybook.com/proof.html#P-63 [10] The take-home formula (Analysis). | https://pretaxplaybook.com/proof.html#P-38 [11] April 2024 final rule — IRS concern “recently escalated” (Verified). https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage | https://pretaxplaybook.com/proof.html#P-60 [12] California workers' comp may also drop (Verified). https://www.wcirb.com/sites/default/files/2025-06/2025-09_usrp-final.pdf | https://pretaxplaybook.com/proof.html#P-42 [13] What employees should know (Analysis). https://www.jobsrus.com/contractor/ElysianAuthorizationForm.pdf | https://pretaxplaybook.com/proof.html#P-39 [14] Program fees (Pending NDA doc). https://elysiandealer.com/faqs/ | https://pretaxplaybook.com/proof.html#P-34 ## The lines the IRS has drawn URL: https://pretaxplaybook.com/guide/irs-lines.html Every memo, rule and audit report that matters, in order, with links to the originals. The IRS hasn't banned hospital indemnity plans, and it hasn't issued a final regulation on this exact design. It has published clear positions on what doesn't work, and it's enforcing them.[2, 6, 8] Chief Counsel memos aren't binding precedent, but they show how the IRS reads the law, and auditors follow them.[2] Timeline 2016–2017IRS Chief Counsel memos (CCA 201622031, 201703013, 201719025) Payments under employer fixed indemnity or wellness arrangements paid pre-tax can't be excluded from income and wages. One memo describes promoters whose fee is about equal to the FICA saved.[1, 2] Jul 12, 2023Proposed regulations (REG-120730-21) Would deny the §105(b) exclusion for amounts paid without regard to incurred medical expenses and require substantiation. Not finalized.[3] Released Jun 9, 2023CCA 202323006 Wellness indemnity payments are taxable wages if the employee has no unreimbursed medical expense, including when premiums are paid through §125.[4] Mar 6, 2024IR-2024-65 General health and wellness expenses aren't medical care, and payments from a non-qualified plan are income.[5] Apr 3, 2024Final rule, 89 FR 23338 Treasury and IRS concern “recently escalated” over fixed indemnity cash payments, and compliance efforts continue. The federal fixed indemnity notice is required from 2025 plan years.[6, 7] Sep 29, 2026Law-firm report of IRS audits The IRS has begun auditing fixed indemnity health/wellness plans marketed on payroll tax savings.[8] The tests that matter | | Line | What it means in practice | Unreimbursed §213(d) expense | Payments are tax-free only when they repay real medical costs the employee actually paid and nobody else reimbursed.[9, 10, 4] | No pay for activities | Payments for simply completing health-related activities are taxable.[6] | Insured, not self-funded | Self-funded “fixed indemnity” arrangements were the target of earlier memos.[1, 11] | Per period, not per service (group market) | To stay an excepted benefit, group fixed indemnity pays per day or other period.[7] | Fees vs. FICA saved | IRS memos treat a fee that roughly equals the FICA saved as a promoter red flag.[1, 12] How Elysian says it stays inside the lines Elysian's counsel says claims require a provider code showing medical care and that the plan is not a wellness program. Elysian's marketing has also described payments for participation. That is the core conflict, and we've asked Elysian to resolve it in writing.[13, 14, 15] Our full guardrail map, with the strength of the evidence for each line, is on the Proof page. Sources: [1] 2016–2017 IRS memos (Verified). https://www.irs.gov/pub/irs-wd/201703013.pdf https://www.irs.gov/pub/irs-wd/201719025.pdf https://www.irs.gov/pub/irs-wd/201622031.pdf | https://pretaxplaybook.com/proof.html#P-56 [2] Chief Counsel memos aren't binding — but they show the IRS view (Verified). https://www.irs.gov/pub/irs-wd/201719025.pdf | https://pretaxplaybook.com/proof.html#P-55 [3] 2023 proposed regulations (not finalized) (Verified). https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage | https://pretaxplaybook.com/proof.html#P-57 [4] CCA 202323006 — the key IRS memo (Verified). https://www.irs.gov/pub/irs-wd/202323006.pdf | https://pretaxplaybook.com/proof.html#P-58 [5] IR-2024-65 — general health and wellness isn't medical care (Verified). https://content.govdelivery.com/accounts/USIRS/bulletins/38f2254 | https://pretaxplaybook.com/proof.html#P-59 [6] April 2024 final rule — IRS concern “recently escalated” (Verified). https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage | https://pretaxplaybook.com/proof.html#P-60 [7] Fixed indemnity rules: excepted benefits and the required notice (Verified). https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage | https://pretaxplaybook.com/proof.html#P-52 [8] The IRS has begun audits (law-firm report) (Verified). https://www.morganlewis.com/blogs/mlbenebits/2026/09/what-goes-around-irs-audits-of-fixed-indemnity-health-wellness-benefit-plans-that-offer-purported-tax-savings | https://pretaxplaybook.com/proof.html#P-61 [9] Section 105(b): benefits are tax-free only to reimburse real medical expenses (Verified). https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage https://www.irs.gov/pub/irs-wd/202323006.pdf | https://pretaxplaybook.com/proof.html#P-48 [10] Section 213(d): what counts as medical care (Verified). https://www.irs.gov/individuals/frequently-asked-questions-about-medical-expenses-related-to-nutrition-wellness-and-general-health | https://pretaxplaybook.com/proof.html#P-50 [11] Fully insured — not self-funded by your company (Elysian-stated). | https://pretaxplaybook.com/proof.html#P-19 [12] Program fees (Pending NDA doc). https://elysiandealer.com/faqs/ | https://pretaxplaybook.com/proof.html#P-34 [13] How Elysian says it stays inside each line (Analysis). | https://pretaxplaybook.com/proof.html#P-62 [14] Step 3 — what triggers a claim payment (Pending NDA doc). | https://pretaxplaybook.com/proof.html#P-31 [15] Holland & Knight tax memorandum (Elysian-stated). | https://pretaxplaybook.com/proof.html#P-64 ## Worked examples (illustration only) URL: https://pretaxplaybook.com/guide/examples.html The math behind the headlines, with every assumption on the table. Illustration only. Every number below is an assumption unless it's footnoted to a source. These aren't quotes, projections for your company, or promises. Real results depend on your census, plan design, fees, claims and tax treatment. Employer: the FICA arithmetic Illustration only | Enrolled employees (assumption) | 150 | Monthly pre-tax premium (lowest tier on one client's form) | $600 | Annual premium per employee | $7,200 | Employer FICA rate | 7.65% | Employer FICA not paid, per enrolled employee | $550.80 | Total, before program fees | ≈ $82,620 / year Formula and inputs:[1, 2, 3, 4] Subtract the program fees in your Financial Impact Statement.[5] All of it depends on benefit payments not being treated as wages.[6, 7] Sensitivity: a 500-employee company Illustration only | Share who qualify (Elysian case data ranged ~60–80%; assume 60%) | 300 employees | At a $600 monthly premium | ≈ $165,240 gross / year | At a $1,200 monthly premium | ≈ $330,480 gross / year Qualification range:[8] Premium tiers:[2] Employee: one month's pay stub Illustration only | | | Before | With the plan | Gross pay | $3,500.00 | $3,500.00 | Pre-tax premium | none | − $600.00 | Taxable pay | $3,500.00 | $2,900.00 | Taxes at an assumed 19.65% | − $687.75 | − $569.85 | Claim payment received (assumed) | none | + $622.00 | Take-home | $2,812.25 | $2,952.25 That's about $140 more that month, in line with Elysian's reported average, only because the plan paid a claim close to the premium. It assumes a 12% federal bracket + 7.65% FICA + no state income tax, and that claim payments aren't taxed.[9, 10, 11] The month with no claim Illustration only Same employee, no claim paid: take-home falls by about $482.10 (the $600 premium minus $117.90 in taxes saved).[9] That's why the claim trigger matters so much, and why we've asked for it in writing.[12] Sources: [1] Employer FICA savings — how to estimate (Analysis). | https://pretaxplaybook.com/proof.html#P-41 [2] Step 1 — pre-tax premium through a Section 125 cafeteria plan (Verified). https://www.irs.gov/pub/irs-wd/202323006.pdf https://www.jobsrus.com/contractor/ElysianAuthorizationForm.pdf | https://pretaxplaybook.com/proof.html#P-30 [3] Employer FICA is 7.65% for most hourly workers (Verified). https://www.ssa.gov/faqs/en/questions/KA-02387.html https://www.irs.gov/taxtopics/tc751 | https://pretaxplaybook.com/proof.html#P-40 [4] The owner's 'raise' (example) (Analysis). | https://pretaxplaybook.com/proof.html#P-104 [5] Program fees (Pending NDA doc). https://elysiandealer.com/faqs/ | https://pretaxplaybook.com/proof.html#P-34 [6] CCA 202323006 — the key IRS memo (Verified). https://www.irs.gov/pub/irs-wd/202323006.pdf | https://pretaxplaybook.com/proof.html#P-58 [7] Step 5 — Elysian's counsel: claim payments are not wages (Elysian-stated). | https://pretaxplaybook.com/proof.html#P-33 [8] Not everyone qualifies (Elysian-stated). https://www.jobsrus.com/contractor/JRU_Flyer_English_2025.pdf | https://pretaxplaybook.com/proof.html#P-43 [9] The take-home formula (Analysis). | https://pretaxplaybook.com/proof.html#P-38 [10] Average take-home pay increase (Elysian-stated). | https://pretaxplaybook.com/proof.html#P-37 [11] Paycheck before/after (example) (Analysis). | https://pretaxplaybook.com/proof.html#P-87 [12] Step 3 — what triggers a claim payment (Pending NDA doc). | https://pretaxplaybook.com/proof.html#P-31 ## Guide FAQs URL: https://pretaxplaybook.com/guide/faqs.html Short answers. Every one footnoted. Is a Section 125 hospital indemnity plan health insurance? No. Fixed indemnity insurance pays a set dollar amount on a covered event, not an amount based on your bill, and it isn't a substitute for comprehensive health insurance. A federal notice says so on marketing materials.[1, 2] Does it replace our ACA medical plan? No. It sits on top of your ACA-compliant medical plan. Employers with 50+ full-time-equivalent employees still face the ACA employer mandate, and hospital indemnity doesn't count toward it.[3] Has the IRS approved this kind of program? No. The IRS doesn't approve programs like this. The pre-tax premium through a written Section 125 plan is standard. The IRS has published positions questioning pre-tax fixed indemnity payments when there's no unreimbursed medical expense, and it has begun audits.[4, 5, 6] Where do the savings come from? From taxes that aren't paid on premium dollars: employer FICA, employee FICA and income tax. It isn't free money. The economics depend on the tax treatment of benefit payments being right.[7, 8] How much could an employer save? A simple estimate is the monthly premium × 12 × 7.65% per enrolled employee, before fees. At a $600 monthly premium, that's $550.80 a year, gross. Results vary and aren't guaranteed.[8, 9] Does every employee come out ahead? No. Take-home pay rises only if the plan pays claims close to the premium. Elysian screens employees, and in its case data roughly 60–80% of a workforce qualified.[10, 11] Who can't participate pre-tax? Only W-2 employees can pay pre-tax. Partners, more-than-2% S-corporation shareholders and 1099 contractors are treated differently.[12] What does the IRS's 2023 memo say? CCA 202323006 concludes that wellness indemnity payments under a pre-tax fixed indemnity policy are taxable wages if the employee has no unreimbursed medical expense related to the payment.[5] Has the IRS started audits? Yes. A September 2026 Morgan Lewis report says the IRS has begun auditing fixed indemnity health/wellness plans marketed on payroll tax savings.[6] What's at stake for the employer if the IRS disagrees? Under-withheld income tax, both halves of FICA, FUTA, penalties and interest. Tax liability for benefits programs often can't be handed off to vendors.[13] Does it lower workers' comp premiums? Possibly in California, where qualifying Section 125 benefit deductions are excluded from workers' comp payroll if records are kept. Don't assume it anywhere else.[14] Who issues the policy? A licensed carrier named in your policy documents. Elysian is a licensed producer appointed with Federal Life and U.S. Fire. We're still waiting on the policy form that names the issuing carrier.[15, 16] More objections, answered with sources: FAQ & objections. Sources: [1] Fixed indemnity rules: excepted benefits and the required notice (Verified). https://www.federalregister.gov/documents/2024/04/03/2024-06551/short-term-limited-duration-insurance-and-independent-noncoordinated-excepted-benefits-coverage | https://pretaxplaybook.com/proof.html#P-52 [2] A supplement — it does not replace major medical (Verified). https://www.jobsrus.com/contractor/JRU_Flyer_English_2025.pdf | https://pretaxplaybook.com/proof.html#P-28 [3] The ACA employer mandate still applies (Verified). https://www.irs.gov/affordable-care-act/employers/employer-shared-responsibility-provisions | https://pretaxplaybook.com/proof.html#P-53 [4] Step 1 — pre-tax premium through a Section 125 cafeteria plan (Verified). https://www.irs.gov/pub/irs-wd/202323006.pdf https://www.jobsrus.com/contractor/ElysianAuthorizationForm.pdf | https://pretaxplaybook.com/proof.html#P-30 [5] CCA 202323006 — the key IRS memo (Verified). https://www.irs.gov/pub/irs-wd/202323006.pdf | https://pretaxplaybook.com/proof.html#P-58 [6] The IRS has begun audits (law-firm report) (Verified). https://www.morganlewis.com/blogs/mlbenebits/2026/09/what-goes-around-irs-audits-of-fixed-indemnity-health-wellness-benefit-plans-that-offer-purported-tax-savings | https://pretaxplaybook.com/proof.html#P-61 [7] It's not free money (Analysis). | https://pretaxplaybook.com/proof.html#P-36 [8] Employer FICA savings — how to estimate (Analysis). | https://pretaxplaybook.com/proof.html#P-41 [9] Employer FICA is 7.65% for most hourly workers (Verified). https://www.ssa.gov/faqs/en/questions/KA-02387.html https://www.irs.gov/taxtopics/tc751 | https://pretaxplaybook.com/proof.html#P-40 [10] The take-home formula (Analysis). | https://pretaxplaybook.com/proof.html#P-38 [11] Not everyone qualifies (Elysian-stated). https://www.jobsrus.com/contractor/JRU_Flyer_English_2025.pdf | https://pretaxplaybook.com/proof.html#P-43 [12] Only W-2 employees participate pre-tax (Verified). https://elysiandealer.com/faqs/ | https://pretaxplaybook.com/proof.html#P-44 [13] What's at stake if the IRS disagrees (Verified). https://www.morganlewis.com/blogs/mlbenebits/2026/09/what-goes-around-irs-audits-of-fixed-indemnity-health-wellness-benefit-plans-that-offer-purported-tax-savings https://news.bloombergtax.com/tax-management-memo/hr-solutions-that-become-tax-problems-how-to-minimize-risk | https://pretaxplaybook.com/proof.html#P-63 [14] California workers' comp may also drop (Verified). https://www.wcirb.com/sites/default/files/2025-06/2025-09_usrp-final.pdf | https://pretaxplaybook.com/proof.html#P-42 [15] Elysian is a licensed insurance agency appointed with two carriers (Verified). https://di.nv.gov/nv/r/doi/licensing/5?p5_agy_org_id=182724&clear=RP | https://pretaxplaybook.com/proof.html#P-2 [16] Which carrier issues the policy (Pending NDA doc). | https://pretaxplaybook.com/proof.html#P-14 # Claim register (public-safe subset of the proof library) Status labels: Verified = checked against a public or primary source; Elysian-stated = from Elysian's materials, not independently verified; Pending NDA doc = requested from Elysian, not yet received; Analysis = our own math or reading, assumptions labeled. ## Company, people & carrier ### P-1 · Verified · Elysian Healthcare LLC is a registered Florida company Elysian Healthcare LLC is an active Florida limited liability company, document #L25000554581, filed December 10, 2025. - Source: Florida Division of Corporations (Sunbiz) — search “Elysian Healthcare LLC” (Record as of Nov 2026) Quote: Entity L25000554581, filed 12/10/2025, managers Kevin Poynter and Corey Elzner. ### P-2 · Verified · Elysian is a licensed insurance agency appointed with two carriers Elysian Healthcare is a licensed insurance producer firm (Nevada #4135885) with health appointments from Federal Life Insurance Company and United States Fire Insurance Company. An appointment means Elysian may sell that carrier's products; your policy documents name your carrier. - Source: Nevada Division of Insurance — agency license record (Opened Nov 12, 2026) Quote: FEDERAL LIFE INSURANCE COMPANY Health Active 12/10/2025 … UNITED STATES FIRE INSURANCE COMPANY Health Active 08/12/2025 ### P-3 · Elysian-stated · Founder Kevin Poynter Founded by Kevin Poynter, a 25+ year employee-benefits veteran (formerly Humana and Boston Mutual). - Source: Elysian Healthcare — About Us (Opened Nov 12, 2026) Quote: “…a 25+ year career in the Financial Services and Insurance Industry.” - Source: Boston Mutual press release (Dec 2015) Quote: Hired as Regional VP of Sales, Workplace Solutions; previously Humana and ING Employee Benefits. ### P-10 · Verified · Bain Capital's SEC filing: indirect economic interest in Federal Life Group's parent Bain Capital holds an indirect economic interest in the parent company of Federal Life Group. Control of Federal Life Group and its parent rests with a general partner independent of Bain. Bain's percentage is not disclosed. - Source: Bain Capital Insurance Solutions, LP — SEC Form ADV (annual amendment) (Signed 03/31/2026) Quote: “…included Federal Life Group, Inc. in Item 7.A solely due to Bain Capital’s ownership of an economic (limited partnership) interest in Federal Life Group, Inc.’s parent company. Actual control of Federal Life Group, Inc. and its parent company rests with a general partner that does not control, is not controlled by, nor is under common control with Bain Capital Insurance Solutions, LP.” ### P-11 · Verified · Federal Life describes itself as backed by Bain Capital Federal Life describes itself as “backed by leading investment firm, Bain Capital,” with an A- (Excellent) AM Best rating (as of June 2025). - Source: Federal Life press release (GlobeNewswire copy) (June 4, 2025) Quote: “With an A- (Excellent) rating from AM Best, and backed by leading investment firm, Bain Capital, Federal Life is in a strong financial position…” - Source: Same release on Federal Life's investor site (June 4, 2025) Quote: (same text) ### P-12 · Verified · Federal Life Insurance Company is wholly owned by Federal Life Group, Inc. Federal Life Insurance Company is a wholly owned subsidiary of Federal Life Group, Inc. Bain's disclosed interest sits above the group, at the parent-company level. - Source: Federal Life — Investor Relations (Accessed Nov 2026) Quote: “Federal Life Insurance Company is a wholly owned subsidiary of Federal Life Group, Inc. that operates as an insurance company.” ### P-13 · Verified · Federal Life Group's parent held more than 90% (Dec 2025) In December 2025 Federal Life Group's parent owned more than 90% of its common stock. That measures the parent's stake, not Bain's. - Source: Federal Life Group — short-form merger release (Dec 15, 2025) Quote: “Federal Life’s parent currently owns more than 90% of the common stock of Federal Life…” ### P-14 · Pending NDA doc · Which carrier issues the policy Coverage is fully insured and issued by a licensed insurance carrier; your policy documents name the carrier. We have requested the policy form and state filing from Elysian. - Source: Evidence request E-2 (policy form, certificate, SERFF filing) (Pending) Quote: Requested Nov 2026. ### P-15 · Verified · How Bain Capital fits — precisely If your policy is issued by Federal Life: Federal Life is backed by Bain Capital through an indirect economic interest in its parent company. Bain Capital is an investor in the carrier — it is not the owner of Elysian Healthcare. - Source: See P-10, P-11, P-12 above ### P-19 · Elysian-stated · Fully insured — not self-funded by your company The hospital indemnity coverage is fully insured by a licensed carrier, not self-funded by your company. - Source: Holland & Knight memorandum to Elysian Healthcare (confidential; available on request, subject to Elysian's permission) (Dec 1, 2025) Quote: “There is no self-insured option or component to the Elysian program. It is a fully insured product that is regulated by the insurance commission of each state where it is offered.” ## Benefits ### P-20 · Elysian-stated · Hospital indemnity cash benefits Fixed cash benefits for covered hospital events — such as a hospital admission, each night in the hospital, and ambulance transport. Amounts depend on the plan chosen; your Schedule of Benefits governs. - Source: Elysian PEO implementation guide (provided by Elysian) (2025–2026) Quote: “$200 for ambulance transport, $500 initial hospital admission benefit, and $200 per night for inpatient hospital stays.” Employee only. ### P-21 · Elysian-stated · $0-copay virtual urgent care $0-copay virtual urgent care by phone or video, 24/7/365, for employees and their families. - Source: Elysian client flyer (JobsRUs, 2025) (2025) Quote: “Virtual Urgent Care available 24/7/365 via phone or video… (No out of pocket cost | $0.00 copay | Available to Spouses and up to 8 Dependents Birth-26 Years)” ### P-22 · Elysian-stated · $0-copay virtual primary care $0-copay virtual primary care, including ongoing care for chronic conditions. - Source: Elysian client flyer (JobsRUs, 2025) (2025) Quote: “Virtual Primary Care dedicated to developing a tailored care plan for members with specialized, ongoing care for chronic conditions.” ### P-23 · Elysian-stated · $0-copay virtual behavioral health $0-copay virtual therapy, counseling, and psychiatry. - Source: Elysian client flyer (JobsRUs, 2025) (2025) Quote: “Virtual Behavioral Health that includes therapy, counseling, psychiatry, and medication management.” ### P-24 · Elysian-stated · $0-copay generic prescriptions $0 copay on formulary generic medications at tens of thousands of pharmacies or by home delivery. - Source: Elysian member prescription letter (provided by Elysian) (2025–2026) Quote: “Enjoy full coverage on generic medications included within our formulary… over 60,000 pharmacy locations nationwide.” ### P-26 · Elysian-stated · Screenings and coaching Lab and biometric screenings, health risk assessments, and one-on-one health coaching. - Source: Elysian — For Participants (Opened Nov 12, 2026) Quote: “Biometric Screening (Basic LIPID Panel, Inflammation, Liver Function Test, Kidney Function Test, Glucose Profile)… Health Coaching” ### P-27 · Verified · Members' tax advice line Members can call a tax advice line run by the law firm Brennan Manna & Diamond. (This is a member service — not a legal opinion on the program.) - Source: Elysian member packet (2024) Quote: “All plan participants have free access to tax advisory services provided by Brennan Manna & Diamond, LLC, and its online platform of BMD Gateway.” ### P-28 · Verified · A supplement — it does not replace major medical A supplemental benefit. It does not replace your major medical plan. - Source: Elysian client flyer (JobsRUs, 2025) (2025) Quote: “This supplemental plan will not replace other benefits.” ### P-29 · Elysian-stated · Claims data behind the averages Per Elysian, the average benefit payout is $3,146, based on more than 150,000 individual policyholders. - Source: Holland & Knight memorandum to Elysian Healthcare (confidential; available on request, subject to Elysian's permission) (Dec 1, 2025) Quote: “…the average benefit payout in the Elysian product is $3,146 … based on claims in a population of more than 150,000 individual policy holders.” ## How it's funded ### P-30 · Verified · Step 1 — pre-tax premium through a Section 125 cafeteria plan Employees pay for the coverage with pre-tax payroll deductions through a Section 125 cafeteria plan. One client's published enrollment form listed monthly premiums of $600, $900, $1,200 and $1,600 depending on plan. - Source: IRS Chief Counsel Advice 202323006 (Released June 9, 2023) Quote: “Pursuant to § 125, the amount of an employee’s salary reduction through a cafeteria plan applied to purchase health coverage is not included in gross income…” - Source: Elysian enrollment authorization (JobsRUs) (Accessed Nov 2026) Quote: “…a pre-tax deduction of monthly premiums equal to $600 for Plan 3, $900 for Plan 1e, $1,200 for Plan 2e, or $1,600 for Plan 4e…” ### P-31 · Pending NDA doc · Step 3 — what triggers a claim payment The plan pays a fixed cash benefit when a covered, provider-coded medical service occurs, as defined in the policy. We have requested Elysian's written claim-trigger definition; some Elysian materials describe monthly assessments and “participation,” so ask for the document before you decide. - Source: Holland & Knight memorandum to Elysian Healthcare (confidential; available on request, subject to Elysian's permission) (Dec 1, 2025) Quote: “For a claim to be paid under the Elysian policy, the Current Procedural Terminology (‘CPT’) codes included by the clinical services provider must indicate that medical expenses under Section 213 of the Code were provided.” - Source: Evidence request E-1 (written claim-trigger definition) (Pending) Quote: Requested Nov 2026. ### P-32 · Elysian-stated · Step 4 — the carrier funds the claim; payroll passes it through The insurance carrier funds each claim payment; your payroll system passes it to the employee as the carrier's paying agent and reports it on the W-2 (Box 14). - Source: Holland & Knight memorandum to Elysian Healthcare (confidential; available on request, subject to Elysian's permission) (Dec 1, 2025) Quote: “The employer’s only obligations are to remit the payments as directed by the carrier and to report the payment amount on Form W-2.” ### P-33 · Elysian-stated · Step 5 — Elysian's counsel: claim payments are not wages Elysian's tax counsel concluded claim payments are not wages. The IRS has taken a different view of programs that pay for activities rather than medical expenses — see P-58 and P-60. - Source: Holland & Knight memorandum to Elysian Healthcare (confidential; available on request, subject to Elysian's permission) (Dec 1, 2025) Quote: “…the Elysian benefits do not fit within the definition of ‘wages.’” Benefits are taxable to the insured only “to the extent that benefits exceed the actual medical expenses.” ### P-34 · Pending NDA doc · Program fees Program fees are disclosed in your Financial Impact Statement. We have requested Elysian's complete fee schedule. - Source: Elysian Dealer FAQ (Opened Nov 12, 2026) Quote: “One defined pre-tax election plus an employer-paid claims processing fee, which is net in your savings.” ### P-35 · Elysian-stated · Fees are designed to come out of the savings Elysian's model is designed so that program fees are covered by the payroll-tax savings the plan creates. Your Financial Impact Statement shows the projected net result; actual results may vary. - Source: Elysian Dealer FAQ (Opened Nov 12, 2026) Quote: “…the program is net-neutral or net-positive for the company because of the payroll-tax savings from Section 125 pre-tax premiums. We will model the exact numbers for your headcount before you commit.” ### P-36 · Analysis · It's not free money Employees buy real insurance with pre-tax dollars and the carrier pays real benefits. The net gain comes from taxes not paid on premium dollars — which is why the plan must meet strict tax rules, and why its value depends on those rules being met. - Source: Our analysis of P-30, P-32, P-33, P-58 (Nov 2026) ### P-37 · Elysian-stated · Average take-home pay increase In Elysian's case data, enrolled employees took home about $140 more per month on average. Individual results vary with pay, withholding, and claims. - Source: Elysian PEO implementation guide (provided by Elysian) (2025–2026) Quote: “…a net increase in employee take-home pay averaging $140 per month ($1,700 per year).” ### P-38 · Analysis · The take-home formula Change in monthly take-home = claim payments received − premium deducted + taxes saved on the premium. Example (assumed 19.65% combined tax rate): a $600 premium saves about $117.90 in tax, so claims of about $622 that month would produce the +$140 average. - Source: Our analysis of P-30 and P-37 (Nov 2026) Quote: Assumption: 12% federal + 7.65% FICA + 0% state. ### P-39 · Analysis · What employees should know Payments above an employee's actual medical costs may be taxable to the employee; lower Social Security wages can mean slightly lower future Social Security benefits; Section 125 elections are generally locked for the plan year. - Source: Elysian enrollment authorization (JobsRUs) (Accessed Nov 2026) Quote: “…this premium deduction authorization will be irrevocable (absent a ‘Change in Family Status’)… through the end of the current plan year.” ### P-40 · Verified · Employer FICA is 7.65% for most hourly workers Employers pay 6.2% Social Security on wages up to $184,500 (2026) plus 1.45% Medicare on all wages. - Source: Social Security Administration — maximum taxable earnings (2026) Quote: 2026 maximum taxable earnings: $184,500. - Source: IRS Tax Topic 751 — Social Security and Medicare withholding rates (Current) Quote: Employer rate 6.2% Social Security + 1.45% Medicare. ### P-41 · Analysis · Employer FICA savings — how to estimate Annual employer FICA reduction ≈ monthly pre-tax premium × 12 × 7.65% per enrolled employee (below the wage base), before program fees, and only if claim payments are not wages. Elysian's own 3,785-employee proposal projected $2,060,534.30 per year net of fees across 3,019 qualified employees (about $682.52 each). - Source: Elysian benefits proposal (redacted client, provided by Elysian) (2025) Quote: “Employer – Annual Savings* $2,060,534.30 … *Employer – Annual Savings is NET of Program Administrative Fees … a projection based on the data provided, and actual results may vary.” ### P-42 · Verified · California workers' comp may also drop In California, workers' comp payroll excludes qualifying Section 125 benefit deductions (with proper records), so the plan may lower your workers' comp premium too. We'll model it with your actual rates; we don't promise a percentage. - Source: WCIRB California — Uniform Statistical Reporting Plan (2025) Quote: Excludes the salary reduction used to fund the welfare benefit portion of a Section 125 cafeteria plan, if separately recorded. ## Eligibility ### P-43 · Elysian-stated · Not everyone qualifies Employees must earn enough each week for the pre-tax deduction to work in their favor (Elysian screens out those under about $240/week). In Elysian's case data, roughly 60–80% of a workforce qualified. - Source: Elysian PEO implementation guide (provided by Elysian) (2025–2026) Quote: “Part-time employees earning less than approximately $240 per week are excluded… approximately 60% to 63% of employees meet qualification parameters.” - Source: Elysian benefits proposal (provided by Elysian) (2025) Quote: Total employees 3,785; total qualified employees 3,019. - Source: Elysian client flyer (JobsRUs, 2025) (2025) Quote: “Employees will be auto-enrolled only if their net-take home pay is higher with the plan.” ### P-44 · Verified · Only W-2 employees participate pre-tax Only W-2 employees can participate pre-tax; some owners (e.g., more-than-2% S-corporation shareholders), partners, and 1099 contractors are excluded by IRS rules. - Source: Elysian Dealer FAQ (Opened Nov 12, 2026) Quote: “…certain owners, such as more-than-2% S corporation shareholders, are treated differently under IRS rules.” ### P-45 · Elysian-stated · Notice and easy opt-out Employees get advance notice and an easy opt-out by phone or online. Exact windows are set in your plan documents. - Source: Elysian client flyer (JobsRUs, 2025) (2025) Quote: “Employees can opt out at any time by contacting our Call Center at (800) 214-6484.” ## Legal basis ### P-46 · Verified · Section 125 requires a written cafeteria plan Premiums are paid through a written Section 125 cafeteria plan, operated consistently and tested for nondiscrimination. - Source: Elysian Dealer FAQ (Opened Nov 12, 2026) Quote: “IRS guidance requires a written cafeteria plan and proper benefit design, elections, and operation.” ### P-47 · Verified · Section 106: pre-tax health premiums are excluded from income Premiums for accident or health insurance paid by salary reduction under Section 125 are excluded from the employee's gross income; hospital and fixed indemnity insurance generally count as accident or health insurance. - Source: Treasury/DOL/HHS final rule, 89 FR 23338 (Apr 3, 2024) Quote: “Premiums paid by an employer (including by salary reduction pursuant to section 125 of the Code) for accident or health insurance are excluded from an employee's gross income under section 106(a) of the Code.” ### P-48 · Verified · Section 105(b): benefits are tax-free only to reimburse real medical expenses When premiums are paid pre-tax, benefit payments are excluded from income only to the extent they reimburse medical expenses (Section 213(d)) the employee actually incurred and that weren't paid by other coverage. - Source: Treasury/DOL/HHS final rule, 89 FR 23338 (Apr 3, 2024) Quote: “…the exclusion ‘applies only to amounts which are paid specifically to reimburse the taxpayer for expenses incurred by him for the prescribed medical care.’” - Source: IRS CCA 202323006 (June 9, 2023) Quote: The exclusion “does not apply to amounts which the taxpayer would be entitled to receive irrespective of whether expenses for medical care are incurred.” ### P-49 · Verified · Section 104(a)(3): the after-tax alternative Fixed indemnity benefits are generally not taxable when premiums are paid after tax — which is how Treasury says most such premiums are paid. Paying pre-tax creates the savings and is the reason the stricter 105(b) rules apply. - Source: Treasury/DOL/HHS final rule, 89 FR 23338 (Apr 3, 2024) Quote: “Employers are reminded that amounts received through accident or health insurance are not taxable if premiums for the coverage are paid on an after-tax basis… The Treasury Department and IRS understand that is how most premiums for hospital indemnity or other fixed indemnity insurance are paid.” ### P-50 · Verified · Section 213(d): what counts as medical care Medical care means diagnosis, cure, mitigation, treatment, or prevention of disease — not things merely beneficial to general health. - Source: IRS — FAQs on nutrition, wellness and general health (Current) Quote: “Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease… They don't include expenses that are merely beneficial to general health.” ### P-51 · Verified · FICA: the point where Elysian's counsel and the IRS disagree The IRS says taxable indemnity payments not made on account of medical expenses are wages for FICA, FUTA and withholding. Elysian's counsel disagrees for payments made by an insurance carrier. Employers carry the withholding risk. - Source: IRS CCA 202323006 (June 9, 2023) Quote: “…taxable wellness indemnity benefits are wages for purposes of FICA, FUTA, and FITW…” - Source: Holland & Knight memorandum to Elysian Healthcare (confidential; available on request, subject to Elysian's permission) (Dec 1, 2025) Quote: “…we do not find ready support for the conclusion that the non-Elysian benefits paid through an insurance contract are subject to federal income tax withholding and FICA.” ### P-52 · Verified · Fixed indemnity rules: excepted benefits and the required notice In the group market, fixed indemnity insurance must be independent and non-coordinated and pay a fixed amount per day (or other period) to be an excepted benefit. Since plan years beginning on or after January 1, 2025, a federal notice must appear prominently on the first page of marketing, application and enrollment materials, including websites, in at least 14-point type. (That is the notice at the top of every page of this site.) - Source: Treasury/DOL/HHS final rule, 89 FR 23338 (Apr 3, 2024) Quote: “In the group market… the insurance must pay a fixed dollar amount per day (or per other period) of hospitalization or illness (for example, $100/day), regardless of the amount of expenses incurred.” “…displays prominently on the first page (in either paper or electronic form, including on a website) of any marketing, application, and enrollment materials… in at least 14-point font…” - Source: Evidence request E-2 (group vs. individual policy form) (Pending) Quote: Requested Nov 2026. ### P-53 · Verified · The ACA employer mandate still applies This plan sits on top of your ACA-compliant medical plan — it doesn't replace it. Employers with 50+ full-time-equivalent employees must offer minimum essential coverage; fixed indemnity insurance doesn't count. - Source: IRS — Employer Shared Responsibility Provisions (Current) Quote: Applicable large employers must offer affordable minimum essential coverage to full-time employees or may owe a payment. ### P-54 · Elysian-stated · ERISA documents ERISA welfare-plan documents (SPD) and possibly Form 5500 filings may apply; Elysian states it provides plan documents. - Source: Elysian Dealer FAQ (Opened Nov 12, 2026) Quote: “…ERISA welfare-benefit notice, SPD, and possible Form 5500 requirements may still apply.” ## The lines the IRS has drawn ### P-55 · Verified · Chief Counsel memos aren't binding — but they show the IRS view IRS Chief Counsel memos aren't binding law, but they show how the IRS reads it. - Source: IRS CCA 201719025 (2017) Quote: “This advice may not be used or cited as precedent.” ### P-56 · Verified · 2016–2017 IRS memos The IRS said employers may not exclude fixed indemnity payments from income when the coverage was bought pre-tax (2017), and that self-funded “fixed indemnity” and wellness cash rewards are income and wages. - Source: IRS CCA 201703013 (Released Jan 20, 2017) Quote: “An employer may not exclude from an employee’s gross income payments under an employer-provided fixed indemnity health plan if the value of the coverage was excluded from the employee’s gross income and wages.” - Source: IRS CCA 201719025 (2017) Quote: Self-funded plan paying cash for health-related activities: amounts are included in income and wages. - Source: IRS CCA 201622031 (2016) Quote: Earlier memo on similar arrangements. ### P-57 · Verified · 2023 proposed regulations (not finalized) In July 2023 Treasury proposed that the 105(b) exclusion not apply to amounts paid without regard to actual medical expenses. It was not finalized in 2024; Treasury said more guidance would come. - Source: Treasury/DOL/HHS final rule, 89 FR 23338 (Apr 3, 2024) Quote: “…the Treasury Department and the IRS are not finalizing the proposed amendments to 26 CFR 1.105-2 at this time.” ### P-58 · Verified · CCA 202323006 — the key IRS memo Payments from a pre-tax fixed indemnity policy are taxable — and are wages for FICA, FUTA and withholding — when the employee has no unreimbursed medical expense, including when the triggering activity costs the employee nothing or is covered by other insurance. - Source: IRS CCA 202323006 (Released June 9, 2023) Quote: “The exclusion from income in § 105(b) does not apply to payments when the employee has no unreimbursed medical expense either because the activity that triggers the payment does not cost the employee anything or because the cost of the activity is reimbursed by other coverage.” ### P-59 · Verified · IR-2024-65 — general health and wellness isn't medical care The IRS warned that personal expenses for general health and wellness are not medical expenses under the tax law. - Source: IRS news release IR-2024-65 (Mar 6, 2024) Quote: “…personal expenses for general health and wellness are not considered medical expenses under the tax law.” ### P-60 · Verified · April 2024 final rule — IRS concern “recently escalated” Treasury said its concerns had escalated about arrangements paying cash even when no medical expense was incurred or when participants simply complete health-related activities, and that such payments generally don't qualify for exclusion from income, FICA, FUTA or withholding. Compliance efforts continue. - Source: Treasury/DOL/HHS final rule, 89 FR 23338 (Apr 3, 2024) Quote: “In some cases, no medical expenses are incurred and participants simply complete certain health-related activities. Benefit payments from such accident and health plans that are not made on account of medical expenses incurred generally would not qualify for exclusion from gross income, FICA, FUTA, or Federal income tax withholding.” ### P-61 · Verified · The IRS has begun audits (law-firm report) A national law firm reported in September 2026 that the IRS has begun auditing fixed indemnity health/wellness plans marketed on payroll-tax savings. - Source: Morgan Lewis — ML BeneBits (Sept 29, 2026) Quote: “The Internal Revenue Service (IRS) has begun to audit fixed indemnity health/wellness benefit plans that have been marketed by promising significant payroll tax savings…” ### P-62 · Analysis · How Elysian says it stays inside each line Our point-by-point map of each IRS line, Elysian's stated approach, and how strong the evidence is — shown on the How It Works page. - Source: Our analysis of P-46 through P-61 and P-64 (Nov 2026) ### P-63 · Verified · What's at stake if the IRS disagrees Employers whose plans are audited may be liable for under-withheld tax, penalties and interest; this liability generally can't be handed off to a vendor. - Source: Morgan Lewis — ML BeneBits (Sept 29, 2026) Quote: “Employers whose fixed indemnity health/wellness benefit plans are audited may be found liable for under-withheld tax as well as penalties and interest.” - Source: Bloomberg Tax — HR Solutions That Become Tax Problems (2026) Quote: Liability for HR and benefits tax issues “often cannot be delegated to outside vendors.” ## Elysian's legal file & audit defense ### P-64 · Elysian-stated · Holland & Knight tax memorandum Elysian has a written tax memorandum from the national law firm Holland & Knight (Dec. 1, 2025) concluding the product is “on solid footing under the published rulings and regulations.” It was written for Elysian; your own advisor should review it. - Source: Holland & Knight memorandum to Elysian Healthcare (confidential; available on request, subject to Elysian's permission) (Dec 1, 2025) Quote: “The Elysian product is on solid footing under the published rulings and regulations, including Revenue Ruling 69-154.” ### P-65 · Verified · What the memo's conclusion depends on The memo relies on facts that should be confirmed for your company: claims triggered only by CPT-coded medical care; no payments for activities; and (in its words) enrollees who “typically do not participate in a traditional employer-provided group medical plan.” - Source: Holland & Knight memorandum to Elysian Healthcare (confidential; available on request, subject to Elysian's permission) (Dec 1, 2025) Quote: “Elysian insurance does not offer benefits linked to participation in wellness activities.” ### P-67 · Verified · No guarantees Projections are estimates based on Elysian's model and your census; actual results may vary. Not tax or legal advice — consult your own tax advisor. - Source: Elysian member packet (2024) Quote: “Elysian Healthcare and the insurance carriers do not guarantee, and expressly disclaims guaranteeing, any and all employee health or wellness benefits or tax savings…” ### P-68 · Pending NDA doc · Audit defense Elysian states it provides legal defense at no cost if the program is examined by the IRS or NCCI. Per Elysian, documentation available under NDA, pending. Ask whether it covers taxes, penalties and interest (it is not described as an indemnity). - Source: Elysian PEO implementation guide (provided by Elysian) (2025–2026) Quote: “…the provider contractually guarantees free legal defense for any IRS or NCCI inquiries regarding the program.” ### P-69 · Pending NDA doc · Audit history Per Elysian, the program has been through IRS and NCCI examinations with no taxes or penalties assessed. Per Elysian, documentation available under NDA, pending. - Source: Elysian PEO implementation guide (provided by Elysian) (2025–2026) Quote: “…concluding all audits with zero dollars assessed in penalties, back taxes, or fines.” - Source: Evidence request E-12 (audit list and closing letters, under NDA) (Pending) Quote: Requested Nov 2026. ## Typical costs outside the plan (for comparison) ### P-83 · Verified · Typical urgent care visit price A basic urgent care visit averaged $118 to $169 in negotiated (allowed) amounts by region in 2023, and $229 to $445 in billed charges. - Source: FAIR Health — FH Healthcare Indicators and FH Medical Price Index 2025, Table 3 (S9083) (2025 (2023 data)) Quote: “…the average charge amount for S9083 varied from $229 in the Midwest to $445 in the West… The average allowed amount for that code varied from $118 in the Midwest to $169 in the Northeast.” ### P-84 · Verified · Typical primary care copay with employer coverage Workers with a copay paid an average of $27 for an in-network primary care visit in 2025. - Source: KFF — 2025 Employer Health Benefits Survey (2025) Quote: “…the average copayment for primary care physician office visits is $27…” ### P-85 · Verified · Typical cash-pay therapy session Private-practice therapists' cash-pay rates averaged about $143 a session in a national study of 175,083 providers. - Source: Health Affairs Scholar 2(9):qxae110 — Insurance acceptance and cash pay rates for psychotherapy in the US (2024) Quote: “…reported cash pay rates, which averaged $143.26 a session.” ### P-86 · Verified · Typical generic prescription copay with employer coverage Workers in plans with three or more drug tiers paid an average $12 copay for first-tier (typically generic) drugs in 2025. - Source: KFF — 2025 Employer Health Benefits Survey (2025) Quote: “…the average copayment is $12 for first-tier drugs…” ### P-87 · Analysis · Paycheck before/after (example) Example month: $3,500 gross pay, a $600 pre-tax premium and an assumed 19.65% combined tax rate. Before: taxes $687.75, take-home $2,812.25. After: taxable pay $2,900, taxes $569.85, plus claim payments of $622.10 that month, take-home $2,952.25, about $140 more. Assumes claim payments aren't taxed (Elysian's counsel's position; the IRS has taken a different view of some plans, see P-33 and P-58). Actual results vary. - Source: Our analysis of P-30, P-37 and P-38 ($3,500 gross is an illustrative assumption) (Nov 2026) ## The human side: what going without looks like (sourced) ### P-88 · Verified · Most families can't absorb a surprise bill 37% of U.S. adults would not cover a hypothetical $400 emergency expense using cash or its equivalent; 63% would. - Source: Federal Reserve — Economic Well-Being of U.S. Households in 2025 (SHED), May 2026 (May 2026) Quote: “Sixty-three percent of adults said they would cover a hypothetical $400 emergency expense exclusively using cash, savings, or a credit card paid off at the next statement…” ### P-89 · Verified · One in four adults skipped medical care because of cost 26% of adults went without some form of medical care in 2025 because they couldn't afford it — 38% of those with family income under $25,000, and 24% even among the insured. 10% skipped mental health care and 9% skipped prescription medicine. - Source: Federal Reserve — SHED 2025 report (May 2026) Quote: “Twenty-six percent of adults went without some form of medical care in 2025 because they could not afford it… Among those with income less than $25,000, 38 percent… compared with 24 percent among the insured.” ### P-90 · Verified · Surprise medical expenses are common 21% of adults had an unexpected major medical expense in the prior 12 months. - Source: Federal Reserve — SHED 2025 report (Table 23) (May 2026) Quote: “Unexpected major medical expenses — 21” ### P-91 · Verified · People ration care and prescriptions 28% of adults skipped or postponed needed health care in the past 12 months because of cost; 27% didn't fill a prescription and 19% cut pills in half or skipped doses because of cost. - Source: KFF — Americans' Challenges with Health Care Costs (Opened Nov 12, 2026) Quote: “…about a quarter (27%) say they have not filled a prescription and about one in five (19%) say they have cut pills in half or skipped doses of medicine due to cost.” ### P-92 · Verified · Medical debt touches four in ten adults About 41% of adults reported debt due to medical or dental bills (2022). - Source: KFF — Americans' Challenges with Health Care Costs (Opened Nov 12, 2026) Quote: “In 2022, about four in ten adults (41%) reported having debt due to medical or dental bills…” ### P-93 · Verified · Covered workers still carry big costs In 2025 the average family premium for employer coverage was $26,993, workers paid $6,850 of it, and the average single deductible was $1,886. - Source: KFF — 2025 Employer Health Benefits Survey (Oct 2025) Quote: “Annual premiums for employer-sponsored family health coverage reached $26,993… workers contributed $6,850… The average deductible… was $1,886 for single coverage.” ### P-94 · Verified · Low-wage workers are least likely to have health benefits Only 41% of private-industry workers in the lowest-paid quarter had access to employer medical benefits in March 2025, and just 18% were enrolled. Part-time workers: 25% access. Service occupations: 48%. - Source: U.S. Bureau of Labor Statistics — Employee Benefits in the United States, March 2025 (Table 2) (Sep 25, 2025) Quote: Private industry, lowest 25 percent average wage: access 41, participation 18. Part-time: 25 percent access. Service occupations: 48. ### P-95 · Verified · Hospitality workers are least likely to get paid sick leave Paid sick leave access among private-industry workers ranged from 55% in leisure and hospitality to 97% in information and finance. - Source: BLS — Employee Benefits in the United States, March 2025 (Sep 25, 2025) Quote: “Access to paid sick leave for private industry workers ranged from 55 percent for the leisure and hospitality industry to 97 percent…” ### P-96 · Verified · Working while sick because the paycheck can't take the hit In a 2025 survey of New York workers, 68% of those who got sick reported working while sick; 52% of low-income workers did so because they couldn't afford to lose the pay (31% overall). One state's data, not national. - Source: Community Service Society of New York — Why New Yorkers Work While Sick (Jan 2026) (Jan 2026) Quote: “…low-income workers (52 percent) reported working while sick because they could not afford to lose the pay… and 31 percent overall.” ### P-97 · Verified · Nearly half of adults with mental illness get no treatment In 2023, 53.9% of adults with any mental illness received mental health treatment — about 27 million of 58.7 million did not. - Source: SAMHSA — 2023 National Survey on Drug Use and Health, annual national report (2024) Quote: 53.9% of adults with AMI (31.6 million of 58.7 million) received mental health treatment in the past year. ### P-98 · Verified · Uninsured Americans 8.0% of people in the U.S. were uninsured for all of 2024. - Source: U.S. Census Bureau — Health Insurance Coverage in the United States: 2024 (P60-288) (Sep 2025) Quote: 8.0 percent of people were uninsured for the entire calendar year 2024. ### P-99 · Verified · Insured but underinsured 23% of working-age adults (19–64) were underinsured in 2024 — covered all year but with out-of-pocket costs high relative to income. - Source: Commonwealth Fund — State of Health Insurance Coverage in the U.S.: 2024 Biennial Survey (Nov 2024) Quote: 23 percent of working-age adults were underinsured. ### P-100 · Verified · What turnover costs Gallup estimates replacing an employee costs one-half to two times annual salary; about 40% of salary for frontline employees. - Source: Gallup — This Fixable Problem Costs U.S. Businesses $1 Trillion (2019) Quote: “The cost of replacing an individual employee can range from one-half to two times the employee's annual salary…” - Source: Gallup — 42% of Employee Turnover Is Preventable but Often Ignored (2024) Quote: “…frontline employees 40% of their salary.” ### P-101 · Verified · Employers rank health benefits first 88% of employers rated health-related benefits “very” or “extremely” important for their workforce in 2025, the top benefit category. - Source: SHRM — 2025 Employee Benefits Survey, executive summary (2025) Quote: “Health-related benefits remained a top priority in 2025, with 88% of employers listing them as ‘extremely important’ or ‘very important’…” ### P-102 · Verified · What a hospital day costs the hospital U.S. hospitals' average expense per adjusted inpatient day was about $3,132 in 2023. That's the hospital's cost, not what a patient is billed. - Source: KFF State Health Facts — Hospital Expenses per Adjusted Inpatient Day (Opened Nov 12, 2026) Quote: United States, 2023: $3,131.91 ### P-103 · Verified · The PEO market At the end of 2025, 502 PEOs served about 5.4 million worksite employees at 233,000 client businesses. - Source: NAPEO — PEO Industry Footprint 2026 (Oct 2026) Quote: 502 PEOs · 5.4 million worksite employees · 233,000 clients (year-end 2025) ### P-104 · Analysis · The owner's 'raise' (example) Example only: 150 enrolled employees × $600/month pre-tax premium × 12 × 7.65% employer FICA ≈ $82,620 a year in employer FICA the business no longer pays, before program fees. Whether any of it goes to the owner is the owner's decision. Requires that claim payments are not wages (see P-33, P-58). Not guaranteed. - Source: Our analysis of P-30, P-40 and P-41 (150 enrolled is an illustrative assumption) (Nov 2026) ### P-105 · Analysis · PEO EBITDA and valuation (example) Example only: if a PEO retained $300 a year per enrolled worksite employee (assumption) across 2,000 enrolled employees, that's $600,000 of added annual EBITDA. At a 6× multiple (the figure used in an Elysian PEO analysis; real multiples vary with size, growth, retention and quality of earnings), that implies about $3.6 million of enterprise value — if buyers treat it as recurring. Depends on your contracts, licensing and how the IRS treats the plan. - Source: Our analysis; 6× multiple is Elysian-stated (Strategic PEO Implementation & Valuation Analysis, private) (Nov 2026) # What this site does not claim - We do not say the program is approved or endorsed by the IRS. The IRS has published positions questioning pre-tax fixed indemnity payments where there is no unreimbursed medical expense (CCA 202323006; 89 FR 23338) and has begun audits (Morgan Lewis, Sept. 29, 2026). - We do not promise or guarantee savings. All savings figures are estimates or illustrations with stated assumptions. - We do not describe the benefit as free or as costing employees nothing. Employees pay a real premium by payroll deduction. - We do not describe benefit payments as pay for participating in wellness activities. - We do not describe Elysian as owned by, or part of the portfolio of, Bain Capital. Per Bain Capital's SEC filing, Bain holds an indirect economic interest in the parent of Federal Life Group, one of the carriers Elysian is appointed with. - Fixed hospital indemnity insurance is not health insurance and does not replace ACA-compliant major medical coverage.