Section 125 Plan Administration

Do your employees pay a portion of their health insurance premiums? If so, there is a way to increase their take-home pay and reduce your company payroll taxes at the same time. There are two types of plans: Premium Only Plan or “POP”, and Flexible Spending Account or “FSA”.

Premium Only Plans

A premium only plan offers a benefit to the employee and the employer. It creates an opportunity to reduce the tax burden on each payroll in which the included benefits are deducted from the employee’s check. Section 125 of the Internal Revenue Code makes this possible. Here is an example of how it work:

• Employee’s insurance premium contributions are deducted from their wages before taxes are calculated automatically.
• The taxable income is reduced by the amount contributed, then the employees take home more money in their check, and pay less taxes,
• When the employee taxable wages are lowered, employers pay less Social Security and Medicare (FICA) payroll taxes.

Flexible Spending Accounts

A Flexible Spending Account (FSA) provides a budgeting tool that assists employee’s pay for out-of-pocket medical, dental, vision, prescription plans, and dependent care expenses not covered by employer benefit plans. In addition, similar to a POP, an FSA helps pay for itself by increasing the employee take-home pay while decreasing the employer payroll tax liabilities.

Employees make a decision as to how much of their salary should be set aside, before taxes, to pay for unreimbursed expenses, such as deductibles, co-payments, and some over the counter medication. This amount is deducted from the employee’s paycheck automatically every pay period and is credited to their FSA account. When the employee incurs an expense, they submit a claim for reimbursement.

Basic Pay Products & Services

Premium Only Plan
Flexible Spending Account

Call for details at (212)-684-8827