Section 125 Plans

  • Section 125 of the Internal Revenue Code allows employees to pay their benefit plan contributions with pre-tax dollars.
  • Employees do not pay federal, state* and FICA taxes and employers save FICA and federal unemployment taxes.
  • Employees increase their take-home pay and employers reduce payroll taxes. A win-win situation!

For Example:
A company has 20 employees (10 single, 10 families) and they are required to pay 20% of the health plan cost.

Employee Savings: Single Family
Monthly Contribution: $70.00 $140.00
Estimated Tax Savings -$17.50 -$35.00
Net Contribution $52.50 -$105.00

Employer Savings: Annual Employee Contribution    $25,200.00
Estimated Tax Savings     $ 2,016.00
(FUTA, FICA, Medicare)

Employees save 25% of their cost and the employer saves more than $2,000.00 per year.