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| Section 125 is a section of the Internal Revenue
Code that allows employees to earmark pre-tax dollars toward payment
of Insurance Premiums, Medical Care, and Dependent Care expenses.
The dollars used for this purpose are not subject to Social Security,
Federal, or most State taxes. In effect, section 125 permits the
employee to increase their net income by using dollars before they
are taxed. |
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Section 125 Plans Overview
For Employees
Sometimes referred to as a cafeteria plan, flex plan, or a Section
125 plan, a Flexible Savings Account (FSA) lets you set aside
a certain amount of your paycheck into an account — before
paying income taxes. During the year, you have access to this
account for reimbursement of expenses — not covered by
insurance — that you regularly pay for
Benefit to the Employer
| The salary dollars employees direct to a Section 125
Benefit Plan reduce employer payroll tax costs, as those
dollars are not subject to the employer Social Security
contribution. In addition, lowering payroll can result
in reduced Federal and/or State Unemployment Tax contributions
and Workers' Compensation premiums |
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| Benefits |
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Reduce employer payroll tax costs |
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Reduce Federal and/or State Unemployment
Tax contributions |
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Reduce Workers' Compensation premiums |
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