Section 125 Tax Savings

Section 125 of the tax code is best known for laying out the rules for cafeteria (or flexible benefit) plans that enable employees to USE PRE-TAX EARNINGS TO PAY for medical expenses, child care and other eligible expenses. Check with your CPA or financial advisor for details.

While set-up and administration is straight forward, there are some specific government rules that must be followed. So be sure to use a qualified vendor. Please give us a call (888) 299-4992 and see how you can profit from setting up a POP.

 

Call 1-888-299-4992
for more information.

 
Without POP

Taxable Income

Less Taxes

Net Pay

Less Group Medical

Other Benefits

Spendable Income

$1500.00

$337.00

$1163.00

$175.00

$50.00

$938.00

Per Pay Tax Savings
$0.00
 
With POP

Gross Income

Less Group Medical

Other Benefits

New Taxable Income

Less Taxes

New Spendable Income

$1500.00

$175.00

$50.00

$1275.00

$287.00

$988.00

Annual Tax Savings
$600.00
 

The main advantage of using a POP is a reduction in taxes for the employer and the employees. Instead of asking employees to pay for insurance with income that has already been taxed, the employer deducts premiums for the coverage on a pre-tax basis. This reduces your total taxable payroll. Employers can often reduce the cost of FICA and other payroll taxes.

 

Paying with pre-tax dollars also reduces the costs for employees. Employees are quick to see the benefits from a POP program. Employees see they are getting a bigger paycheck in addition to their employer sponsored benefits. Workers may even use the savings to buy additional benefits that they otherwise could not afford. Employers can benefit from an improvement in employees attitude and work performance.

 

A Section 125 Plan benefits employees and can reduce your payroll taxes.