Texas Section 125 Plan Guide for Employers (2026)
Texas has the largest Marketplace enrollment in the country. CMS reports 4,172,233 Marketplace plan selections for the 2026 open enrollment period. Employees are actively comparing employer coverage, and affordability is the deciding factor. A Section 125 plan improves net pay while lowering employer payroll taxes.
Texas Coverage Context
Texas uses HealthCare.gov and has not expanded Medicaid. That makes employer coverage more important for many workers, especially in hourly and service‑heavy industries.
Texas Employer Strategy Options
| Strategy | Strength | Best Fit |
|---|---|---|
| Traditional group plan | Stability | Full‑time teams |
| Fixed employer contribution | Budget control | Large multi‑site employers |
| Group plan + Section 125 | Net‑pay lift | Price‑sensitive teams |
Texas Cost Drivers You Can Control
- Employer contribution level
- Plan design
- Participation rate
- Pre‑tax vs after‑tax deductions
Section 125 directly impacts payroll taxes, which is why it’s a key lever.
Texas Implementation Steps
- Eligibility rules
- Payroll deduction setup
- Plan document creation
- Election collection
- Employee education
Summit Health Benefits manages compliance and rollout as your advisor/administrator. Start with the Section 125 overview.
Texas Paycheck Example (Illustrative)
| Example | After‑tax | Pre‑tax |
|---|---|---|
| Employee contribution | Taxed wages | Pre‑tax wages |
| Employer payroll tax cost | Higher | Lower |
| Employee net pay | Lower | Higher |
Texas Employee Communication Tips
- Explain why taxable wages may be lower.
- Provide a paystub example during enrollment.
- Share W‑2 guidance early.
Helpful links:
Texas FAQs
Do we need a plan document?
Yes. Section 125 requires a written plan document.
Can we keep our carrier?
Yes. Section 125 works with your existing plan.
Is this only for large employers?
No. Small employers often see strong payroll tax ROI.
Next Step for Texas Employers
- Estimate savings with the Summit Health Benefits calculator
- Explore plan support at Summit Health Benefits
Sources
- CMS 2026 Marketplace plan selections by state (Texas platform and enrollment): https://www.cms.gov/newsroom/fact-sheets/marketplace-2026-open-enrollment-period-report-national-snapshot-2
- CMS exchange platform list (HealthCare.gov states): https://www.cms.gov/cciio/resources/fact-sheets-and-faqs/state-marketplaces
- Medicaid expansion status by state: https://www.kff.org/medicaid/issue-brief/status-of-state-medicaid-expansion-decisions-interactive-map/