DESCRIPTION
Section 125 Plans are strictly designed in accordance with IRS guidelines, and can’t be changed. These plans help Employees afford their Healthcare Benefits, by allowing Employees to pay for their portion of the Employee Benefits before Income Tax.
BENEFITS
The main benefit is the Tax Savings. If an Employee pays 25% Income Taxes and contributes $600 a month towards their Employee Benefits, the savings would be significant. Instead of $300 being deducted from their “Net Pay” every two week, the Employer would deduct the $300 BEFORE Taxes, and their “Net Pay” would only be $225 less. A $150 Monthly Savings for the Employee.
The Employer also saves on reducing their taxable Payroll.
SUMMARY
Every Employer who asks their Employees to contribute to their Benefits Program should provide a Section 125 Plan in order to make that contribution be before Taxes.
