Section 125 plans introduced to allow for health benefits on a Pretax basis.

1978

Self Insured plan introduced to the marketplace without state approvals.

1999

Affordable Care Act launched to improve access to health coverage for individuals nationally.

2010

Wellness benefits added to the ACA allowing for the payment of specific wellness program activities.

2014

Section 125 Indemnity benefit plans become fully insured products by major insurance carriers.

2018

Fully Insured plan introduced and receives State approvals nationally.

2020

Plan structure history

2009

We began offering the Self Insured plan and Supplemental Indemnity plans to our clients. In 2020 we began offering the Fully Insured plan exclusively. The fully insured plan removes the risk from the employer and places it squarely on the shoulders of the Insurer. The Fully Insured plan is underwritten and issued in compliance with all state and federal laws. Regulatory Standing — The Government's Final Rule: This structure has been challenged. It has survived every time. Q: Has the government tried to challenge this structure? Yes. Multiple times. And the structure is still standing. The legal foundation for this plan traces to 1969 — Revenue Ruling 69-154 — when the IRS itself established that fixed indemnity claim payments triggered by real medical events are not fully taxable. That ruling has been the governing law for over 55 years. In 1978, Congress passed the Revenue Act of 1978 and created Section 125 of the Internal Revenue Code — the mechanism that allows employees to pay benefit premiums through pretax payroll deductions. This is the structural engine that makes FICA optimization possible. That complete structure has now been in place for nearly 50 years — which is precisely why we say this plan has been hiding in plain sight. In 2016, the IRS issued a memo targeting fraudulent wellness schemes — self-funded arrangements where cash payments were triggered by completing a survey or calling a health coach with no real medical event involved. The memo used overly broad language that created widespread market confusion. In 2017, the IRS corrected itself — issuing new guidance specifically confirming that the 2016 memo was never intended to modify or override Revenue Ruling 69-154. The legal framework for legitimate, fully insured fixed indemnity plans remained intact. In 2023, the IRS proposed formal new regulations that would have changed the tax treatment of fixed indemnity benefit payments. The insurance industry, major law firms, and plan sponsors responded with overwhelming opposition — arguing the proposed rule was contrary to Congressional intent and could only be changed by an act of Congress, not a regulatory amendment. In March 2024, the U.S. Departments of Treasury, Labor, and Health and Human Services declined to finalize the IRS's new proposed rule. It did not become law. This structure has now survived over five decades of legal scrutiny — including direct regulatory challenge — and has emerged unchanged every single time. The reason is straightforward: this plan pays claims triggered by physician-delivered care corresponding to documented medical events. That is precisely what Revenue Ruling 69-154 protects — and has protected since 1969. The arrangements the IRS was targeting paid cash for completing wellness surveys with no real medical event involved. Those are not the same thing. The law has always treated them differently. It still does. Q: So the legal foundation is solid? Yes — and it is older and more durable than most people realize. The legal principle is 55 years old. The payroll mechanism is nearly 50 years old. The structure has been reviewed, challenged, clarified, and reaffirmed across multiple administrations and multiple regulatory attempts. It has never been overturned — because it was built on legitimate statutory ground from the beginning. That is not luck. That is architecture.

Just the FAQs

American Employer Foundation

Frequently Asked Questions

From Business Leaders

You’ve heard the concept. These are the questions that usually follow.

Q: Why do CEOs choose Payroll Optimization?

CEOs choose Payroll Optimization because it converts an existing operating expense into a strategic financial advantage—without changing employee wages, replacing payroll providers, taking on debt, investing additional capital, or disrupting normal business operations.

Smart operators recognize the financial tailwinds it creates: increased working capital, stronger cash flow, improved employee support, and greater flexibility to invest in growth.

Payroll Optimization can provide the capital needed to scale a growing company or revitalize an undercapitalized business—without introducing financial or operational risk to the employer.

The impact on business value is immediate. Recovered funds flow directly to EBITDA, increasing the dollar value of the business based on its existing valuation multiple.

Q: This sounds too good to be true. What’s the catch?

That’s the right instinct—and it’s exactly why we lead with it.

There is no free lunch. What there is, is a structural optimization that most employers have never been shown because most advisors are not looking for it, and your payroll administrator is not incentivized to offer it to you.

This plan sits between Payroll Administration and Compliance, so most operators simply do not know to look for it.

The legal mechanism is nearly 50 years old. It is not a loophole, workaround, or temporary strategy. It is a legitimate structural approach embedded in how American payroll operates. If you have more than 50 employees, you already have the foundation for optimization.

The reason it feels unusual is because it is unusual—not because something is wrong with it.

Q: What exactly does “Payroll Optimization” mean?

It means we examine how your payroll is currently structured and determine whether a more favorable payroll structure is available to you.

If it is, optimization produces reduced FICA contributions for your business and employees every payroll cycle—without changing employee gross pay, modifying existing benefits, or adding administrative burden to your team.

This is found net revenue—not a rebate, tax credit, or one-time event.

The effects of the plan are structural and recurring.

Q: Does this replace our current health insurance, carrier, or broker?

No.

Nothing about your existing major medical offering changes. Your current benefits, carriers, brokers, and coverage remain exactly as they are.

What we add operates alongside what you already have—not instead of it.

Q: Why is this NOT an HR decision?

To clarify the internal routing, PICO is a Payroll Optimization program rather than an HR or traditional benefits program.

It introduces no changes to existing health plans, requires no new individual employee benefit elections, and adds no administrative burden for HR.

Because it functions as a revenue decision—generating additional net revenue for the company while increasing take-home pay for employees—most organizations have it evaluated by finance or the executive team first, with HR involved later for compliance review and implementation.

The downstream effects of Payroll Optimization include pre-packaged services and voluntary benefits that cost employees nothing.

Because participating employees receive the same package, there are no individual benefit selections to manage or explain. That is why this is fundamentally a financial decision rather than an HR decision.

Q: What does this cost us?

There is no fee to determine whether your business qualifies.

If you do not qualify, the conversation ends there at no cost to you.

If you do qualify and choose to move forward, the program is structured so that the dollars it generates fund the program itself.

There is no net cost to the employer or the employee—ever.

Q: What does our HR or payroll team have to do?

Very little.

Implementation is designed to be a Done-For-You experience.

We handle enrollment, administration, and ongoing support. Your internal team is not burdened with new processes, additional vendors to manage, or new reporting requirements.

Q: What are the enrollment periods for this plan?

The plan can be implemented at any time.

There are no traditional “open enrollment” periods.

Employers can begin realizing the financial impact of the plan from the first day the plan goes live.

Q: Do the benefits associated with the plan coordinate with or affect the benefits we currently offer employees?

No.

There is no coordination between these benefits and the benefits you already have in place.

The benefits stand alone and do not require employers or employees to have major medical insurance.

Q: Can employees be turned down because of pre-existing conditions?

No.

All benefits are guaranteed issue.

Q: Will our employees have to do anything?

Very little.

Employees who choose to participate simply download the mobile health app and complete a Health Risk Assessment (HRA). Employees receive health recommendations which are based on the health information shared in the HRA. IF employees update, modify or otherwise add more information to the mobile health platform the recommendations will be adjusted according to the new data.

Participation is voluntary.

Employees who participate experience an increase in net take-home pay—not a gross pay raise, but a structural improvement in how their compensation is delivered.

Employees who choose not to participate are unaffected.

Q: How do our employees actually benefit from the plan?

Participating employees receive increased take-home pay every pay period. They gain access to a fully insured supplemental health management platform including 24/7 Virtual Doc visits, access to more than 1,000 prescriptions for their family with no co-pays, and a suite of indemnity-based coverage for hospitalization, critical illness, accidents, emergency room events, and more.

The platform also includes behavioral health support, live biometric assessments using facial-scan technology, and personalized health recommendations from board-certified physicians.

This gives employees greater visibility into their health and access to resources many have never had before.

For some employees, these may be the only meaningful health-related benefits they can afford.

Optimization allows participating employees to receive benefits (incl. Virtual Doc Visits and Prescriptions**) for their families** that address a significant portion of common acute-care needs.

Q: We have a diverse employee population. How do you communicate with employees who speak other languages?

We provide materials and support in multiple languages, including access to fluent bilingual support.

Q: Is this legal? Has it been challenged?

Yes, it is legal.

The plan underwent extensive state and federal compliance review before it could be approved for issue through major insurance companies. The structural approach is grounded in longstanding provisions of the U.S. tax code and has been used for nearly five decades.

It is not a grey-area strategy, and it is not dependent on a temporary regulatory interpretation.
The plan is fully insured and underwritten through one of the most respected insurance marketplaces in the world.
It is not a self-funded arrangement or captive structure carrying hidden employer exposure.
The plan has been approved for issue by the appropriate Department of Insurance authorities across the United States.

Q: How do we know what the financial impact will be before we commit?

You do not have to guess.

The Financial Impact Report we provide gives you a projected financial impact specific to your business, based on your actual employee count and payroll structure, before you make any decision.

The numbers are clear, conservative, and yours to evaluate.

Q: Are there case studies or client examples?

Yes.

We have numerous client examples.

Results vary based on industry, average employee income, tax status, and location, although organizations operating in higher-tax states can experience greater financial impact.

Our Executive Summary uses conservative assumptions based on the lowest averages across industries and states.

Q: How long does implementation take?

Implementation is typically completed within a few weeks after a decision to move forward.

There is no prolonged rollout, systems overhaul, or disruption to your existing payroll cycle.

Q: What kind of businesses qualify?

Qualification depends on employee type, employee count, and payroll structure.

We work with organizations across a wide range of industries, including restaurants, healthcare, construction, federal contracting, education, security, technology, fitness, hospitality, and many more.

The Financial Impact Report determines eligibility specific to your organization.

Q: Who is the American Employer Foundation?

The American Employer Foundation works with employers that qualify for the PICO strategy and specializes in creating financial tailwinds for employers and employees.

AEF was built around identifying structural financial opportunities inside payroll and helping employers convert those opportunities into greater working capital, stronger employee support, and increased enterprise value.

Our founder, Mike Plummer, spent years analyzing businesses from the inside and built AEF around the idea that major financial opportunities are often hidden inside expenses companies have simply learned to accept.

Accountability — For You and Your Team

The optimization is structural. The proof is real-time.

Q: How will I know if the plan is doing what you say it will do? Is there proof?

Absolutely.

Designated individuals within the company receive access to the CEO Dashboard, which tracks plan utilization, engagement levels, participation statistics, usage of specific coverages, and every dollar of net revenue generated for the company through the optimization.

You can see the impact as it happens.

Q: How will employees know if the plan is helping them? Can they track their own progress?

Yes.

Employees receive their own personalized dashboard with ongoing, dynamic feedback and progress tracking.

They can monitor vital signs from virtually anywhere and share that information with physicians.

They can also track daily, weekly, monthly, and annual progress through the mobile health app.

Every participating employee begins a personalized health journey with a health score based on the Health Risk Assessment.

Employees receive personal recommendations from physicians, along with ongoing recommendations through the mobile health platform.

Employees who choose to engage with available life-coaching resources can also receive ongoing encouragement and accountability.

The goal is to give every participating employee something that feels like their own personalized health and support team.

For many employees, these are resources and benefits they have never had access to before.

How soon do you want the loss to stop?

You've asked the right questions. Here's the one most business leaders don't think to ask.

Q: What happens if we decide to wait?

That's a fair question. Here's the honest answer.

Every payroll cycle that runs under your current structure is a cycle where the optimization didn't happen. Those savings don't accumulate and wait for you. They don't roll forward.

They are simply gone.

For a business with 100 employees, the typical additional net revenue is approximately $50 per employee per month. That's $5,000 every month. $60,000 every year minimum.

A 90-day decision window for an employer with 100 employees costs roughly $15,000 in recoverable net revenue that will never be recovered.

We don't say that to create pressure. We say it because it's true — you deserve an honest answer to an honest question.

The Financial Impact Report is free.

The math is yours to evaluate.

But the clock on your payroll cycle doesn't pause while the decision is pending.

Q: Is there ever a good reason to wait?

Yes. If your business is in the middle of a major transition — an acquisition, a restructuring, or has fewer than 25 employees — timing matters and we'll tell you that honestly.

Outside of that, waiting is not a strategy. It is the absence of one.

Q: Can you show me what the daily cost of inaction looks like for my specific business?

Yes. That's exactly what the Financial Impact Report produces.

Once we know your employee count and current payroll structure, we can tell you precisely what each passing payroll cycle is costing you in unrecovered net revenue. The number is specific to your business — not an industry average, not a ballpark.

Most employers find that number clarifying. It tends to make the decision obvious.

For every 100 employees you have,

you're leaking $200 net revenue per day,

how soon do you want it to stop?

The Ripple Effect — What Optimization Actually Touches

Most employers think about payroll optimization in terms of FICA savings. That's where it starts. It's not where it ends.

Q: Does this only impact our payroll line item?

No. That's one of the most important things to understand about structural optimization.

The FICA savings are real and recurring — but they are the entry point, not the ceiling. The downstream effects on your business financials are often larger than the direct savings themselves.

When your employees take home more money without a pay raise, something changes. Retention improves. Morale improves. The financial stress that quietly drives absenteeism and disengagement begins to ease. None of that shows up on a payroll report — but all of it shows up on your bottom line.

Q: How does this affect employee turnover?

Directly and measurably.

The average cost to replace an employee is conservatively estimated at 30% of their annual salary — accounting for vacancy drag, recruiting time, onboarding, ramp-up, and lost productivity. For most businesses that number is actually higher once you factor in institutional knowledge and team disruption.

For a restaurant or hospitality business running 200 employees at an average wage of $35,000, a 30% annual turnover rate generates roughly $630,000 in turnover-related costs every year.

When employees experience a tangible increase in take-home pay — combined with access to health management resources that meaningfully improve their lives — turnover decreases. The math compounds quickly in your favor.

Q: What other financial factors does this touch?

More than most employers expect. Here's what we consistently see:

*Recruitment costs drop. When your existing workforce is more stable, you spend less time and money replacing people. Word also travels — employees talk, and a business that puts more money in people's pockets becomes a place people want to work.

*Absenteeism decreases. Employees with access to 24/7 virtual care, proactive health management, and financial stability miss fewer days. Every unplanned absence has a real cost — coverage, overtime, disruption, customer experience degradation.

*Productivity increases. Financial stress is one of the leading causes of workplace distraction and disengagement. When that pressure eases, people show up differently.

*Benefits competitiveness improves. You are now offering a supplemental health management platform at no cost to your employees — without touching your existing major medical plan. That changes how candidates evaluate your offer and how current employees evaluate their options.

Q: Can you quantify the total financial impact — not just the payroll savings?

Yes. The Executive Summary we provide models the direct FICA savings alongside the projected turnover cost reduction based on your actual headcount, average wage, and industry turnover rates.

Most employers are surprised by the composite number. The payroll savings alone justify the conversation. The turnover impact is often what closes it.

Q: Does this affect the value of my business?

Yes. And for most business owners, this is the number that matters most.

Business valuation in most industries is calculated as a multiple of EBITDA — earnings before interest, taxes, depreciation, and amortization. When your net revenue increases every payroll cycle through structural optimization, that increase flows directly into your EBITDA.

It doesn't stop there.

Every dollar of recurring FICA savings added to your bottom line gets multiplied at exit. For a business valued at a 5x EBITDA multiple, $60,000 in annual payroll savings doesn't add $60,000 to your valuation. It adds $300,000.

For a business with 500 employees generating $300,000 in annual savings at a 5x multiple — that's $1,500,000 in added enterprise value. From a structural change that cost you nothing to implement.

Most business owners spend years looking for ways to move their valuation number. This moves it permanently, recurringly, and immediately upon implementation.

Q: Is the valuation impact something you can show me before I commit?

Yes. The Executive Summary that models your projected FICA savings, applies your industry EBITDA multiple, and shows you the estimated valuation impact specific to your business.

For owners who are five to ten years from an exit — or thinking about one at all — this number tends to reframe the entire conversation.

Q: Why would anyone say "No" to this?

There are 3 scenarios that seem to be the most common.

The business doesn't have enough employees to qualify for implementation. That's a straightforward conversation and we'll tell you immediately.

The person evaluating the plan isn't the person responsible for the net revenue or enterprise value of the business. When someone without P&L accountability reviews a P&L optimization, the decision often stalls — not because the math is wrong, but because it's being evaluated by someone whose job isn't the math.

And occasionally, a leader shares the concept with an advisor who has never encountered this structure before. An unfamiliar advisor will almost always default to skepticism — not because something is wrong with the plan, but because their credibility feels safer with a "no" than with an "I don't know." That's human nature. It's not analysis.

If none of those three situations apply to you — the math is going to be obvious.