Pre-tax deduction paycheck impact.

Worked example

Gross $3,000 every two weeks, 22% federal bracket, $200 to a traditional 401(k), $100 to a payroll HSA and $150 to a section 125 health premium. Pre-tax total: $450. Federal withholding saved: 22% × $450 = $99.00. Social security and Medicare saved apply only to the HSA and premium ($250): 7.65% × $250 = $19.13. Total tax saved: $118.13, so take-home falls by about $331.88, not $450.

Formula notes

• Federal income tax: traditional 401(k), HSA and section 125 premium amounts are excluded from federal income tax withholding. Saved tax = marginal rate × pre-tax total.
• FICA: 401(k) elective deferrals stay subject to social security (6.2%) and Medicare (1.45%). HSA contributions through a section 125 plan and section 125 premiums are exempt from both. Social security stops at the 2026 wage base of $184,500; if your annual gross is above it, the real cost of $100 uses only the 1.45% Medicare rate.
• Real cost of $100: 401(k) = $100 × (1 − marginal rate). HSA or premium = $100 × (1 − marginal rate − FICA rate).
• Limits: 2026 401(k) deferral limit $24,500 before catch-up; 2026 HSA limit $4,400 self-only, $8,750 family. The tool warns when your paycheck amount annualizes above these.
• Not modelled: state and local tax (some states do not follow the federal exclusion), the 0.9% Additional Medicare Tax, employer match, and a mid-year start. Employer HSA contributions count toward the HSA limit.

Sources (as of September 30, 2026): IRS Publication 15 (2026) for rates, the $184,500 wage base and the 401(k) and section 125 treatment; IRS Publication 15-B (2026); Rev. Proc. 2025-19 for HSA limits; IRS IR-2025-111 for the 401(k) limit (Nov. 13, 2025); IRS tax rates for the 10–37% rates.

FAQ

Does a 401(k) reduce my social security and Medicare tax?

No. Traditional 401(k) deferrals lower federal income tax withholding only; they remain wages for social security and Medicare.

Why is a payroll HSA cheaper than a 401(k) dollar?

HSA contributions made through a section 125 cafeteria plan also skip the 7.65% FICA tax. Contributions made outside payroll get only the income tax deduction.

Is a section 125 premium always pre-tax?

Only for qualified benefits your employer's cafeteria plan covers, such as health insurance premiums. Check your pay stub or HR.

Does this match my pay stub?

It estimates the tax effect of the deductions only, not your full net pay. Withholding depends on your W-4 and state.