Section 125 and Flexible Spending Plan
Health Insurance | Dental Insurance | Ancillary Insurance | Section 125 Plan | 401 (k)
Through IRS Code Section 125, employers can allow their employees to pay for their contributions to the health, dental, disability, and group term life insurance programs with pre tax dollars. The net result is that the employee saves at least 22.65% in Federal and FICA taxes. At the same time the employer should save a minimum of 10% in payroll taxes (FICA match, Federal Unemployment and State Unemployment) on the amounts that the employee has deducted pre-tax. Without the benefit of a POP, the employee's contribution to most employer benefit plans are required to be deducted afrer tax. The POP allows this deduction pre-tax.
The most important fact to recognize is that this is a tax-benefit program. There are certain regulatory requirements that have to be met in order to comply with tax law regulations that govern this type of benefit arrangement. Some of these requirements include: discrimination testing, properly designed and executed plan.
Why Should Your Company Adopt A Premium Only Plan?
- Company SAVES Money
- Lower Benefit Costs
- Turn-key Services
- Vehicle for Cost Containment
- Employees SAVE Money
- Employee Morale
The application of payroll to these expense areas may vary from state to state. Check with your tax counsel for the ruling in your state or jurisdiction.
The program is designed to efficiently and cost effectively allow our clients to achieve the intended benefits the IRS allows without the administrative burden.
