FICA‑Savings Program Implementation Checklist
FICA
Credit and Refund
12/1/20252 min read
1. Assess Eligibility & Workforce Scope
Identify which employees qualify: typically full-time W‑2 employees (not contractors or freelancers).
Confirm that your business has sufficient payroll volume to make the program financially worthwhile.
Document baseline FICA taxes for current payroll to measure savings after program implementation.
2. Select a Compliant FICA‑Savings Program
Work with a vendor or advisor that structures the program to meet IRS and ACA rules (e.g., Sections 105, 125, 106, 213(d)).
Ensure that the program integrates pre-tax benefit deductions, wellness, or supplemental benefits without reducing take-home pay.
Review the program’s service offerings: telehealth, urgent care, prescription coverage, mental health support, preventive services, wellness perks.
3. Plan Design & IRS Compliance
Confirm that all benefit contributions are pre-tax eligible under IRS rules.
Ensure non-discrimination compliance: benefits must not favor highly compensated employees over rank-and-file staff.
Verify that wellness or preventive benefits meet ACA requirements for coverage and minimum essential services if applicable.
Document plan rules, contributions, employee eligibility, and administrative processes.
4. Estimate FICA Savings
Calculate estimated employer FICA tax reduction based on restructured wages/benefits.
Consider how savings scale with headcount and employee participation.
Compare savings against any administrative or vendor fees.
5. Integrate With Existing Benefits
Coordinate with existing pre-tax benefits (HSA, FSA, 401(k), health insurance) to avoid overlap or double-counting.
Ensure payroll systems correctly process pre-tax deductions and reflect FICA adjustments.
Communicate clearly to HR/Payroll teams about new contribution codes, benefits categories, and reporting requirements.
6. Employee Communication & Engagement
Prepare a clear employee announcement explaining:
Benefits they receive (wellness, telehealth, etc.)
Effect on take-home pay (ideally neutral or improved)
How participation works
Provide educational materials or webinars to maximize engagement.
Track employee adoption rates to optimize program utilization.
7. Payroll System Configuration
Update payroll system to reflect pre-tax contributions for all eligible employees.
Ensure FICA taxable wages are accurately reduced for contributions.
Set up periodic audits to verify proper tax withholding and benefit application.
8. Monitor & Document Compliance
Keep detailed records of employee participation, contributions, and benefit usage.
Perform regular internal audits to ensure FICA tax reductions match program documentation.
Retain documentation for IRS or state audits (generally 3–7 years).
9. Review & Adjust Annually
Recalculate FICA savings based on updated payroll and benefit participation.
Review new IRS guidance or legislative changes that could affect eligibility or compliance.
Adjust the program for changing workforce composition or new benefit offerings.
10. Optional Enhancements
Combine with other payroll-tax reduction strategies:
R&D payroll tax credits for eligible small businesses
Work Opportunity Tax Credit for new hires from targeted groups
Retirement plan contributions (pre-tax employee deferrals)
Consider wellness incentives tied to engagement (e.g., preventive screenings, wellness challenges) while staying within IRS limits.
✅ Key Takeaways
Properly implemented FICA‑Savings programs can reduce employer FICA taxes $500–1,200 per employee annually, enhance benefits, and improve retention.
Compliance with IRS Sections 105, 125, 106, 213(d) is critical — structured, documented, and auditable plans avoid penalties.
Integration with existing payroll, benefits, and wellness programs maximizes both tax savings and employee value.
Regular monitoring and annual updates ensure long-term compliance and continued efficiency.