What is a Section 125 Premium Only Plan?
The Revenue Act of 1978 introduce IRS Section 125, which allows employers to reduce payroll taxes by adjusting the payroll process. Also, Section 125 Premium Only Plan employees can choose from pre-tax or tax-free basis pay for their portion of premium insurance rather than after-tax basis, which creates saving for both the employer and employee.
How Employees Benefit from a Premium Only Plan.
Section 125 premium deductions can save employees 20 or 40% of their pre-tax. The tax savings are on city, state, and federal income taxes, including Social Security and Medicare taxes on money used to pay for their portion of insurance premiums
How Employers Benefit from a Premium Only Plan.
Employers benefit by reducing the matching Social Security and Medicare taxes (7.65%), and sometimes Federal and State unemployment taxes (up to 10%). Depending on the state, employers may also be eligible for worker’s compensation savings (2% to 50%).
Have Questions? and want to read more about the changes click Section 125 Premium Only Plan Document (POP) for more details.
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