What is a health 125 deduction?
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A Section 125 plan typically lets employees use pretax money to pay for health insurance premiums (medical, dental, vision). Other options include retirement deposits, supplemental life or disability insurance, Health Savings Accounts, and various medical or dependent care expenses.
Is a premium only plan the same as a Section 125 plan?
The Premium Only Plan is the building block of the Section 125 Plan. It allows for certain employee paid group insurance premiums to be paid with pre-tax dollars. The qualified premiums (if offered by employer) are: Health.
Who needs a Section 125 plan?
125 plan is required for employers who want to allow employees to choose the qualified benefits they want and avoid paying income taxes on the amount of wages they contribute to obtain those benefits.
Is 401k section 125?
What other terms are used to describe a 401(k) cafeteria plan? These plans are sometimes referred to as Section 125 Plan (from the applicable IRS code) or a flexible benefits plan.
What is IRS section 125 premium only plan?
IRS code Section 125 allows an employer to set up a Premium Only Plan (POP), where an employee’s insurance premium contributions can be deducted from his or her payroll on a pre-tax basis. This can save employees up to 40% on income taxes and payroll taxes. The employer also saves on these taxes.
Are Section 125 deductions reported on W-2?
The total dependent care benefits the employer paid to the employee or incurred on the employee’s behalf (including amounts from a section 125 plan) should be reported in Box 10 of Form W-2.
Is a Section 125 plan an HSA?
A Section 125 plan is just one of several ways for employers to help employees with funding their HSAs. Employers offering HDHPs face the choice of whether and how to help their employees with the funding of the employees’ HSAs. The options include the following: Option 1 – Employee after-tax contributions.
Are HSA contributions section 125?
Employers may choose to make contributions to their employees’ HSAs as part of a Section 125 plan (also known as a “cafeteria plan” or a “salary reduction plan”). Employers gain greater savings by allowing their employees to contribute on a “pre-tax” basis to their own HSA via payroll deduction.
Why should I have a section 125 plan?
Accident and health benefits (but not Archer medical savings accounts or long-term care insurance)
How to set up Section 125 plan?
Choose Lists > Payroll Item List.
What are qualified benefits under Section 125?
– Flexible Spending Accounts (FSAs). An FSA allows employees to pay for qualified out-of-pocket medical expenses on a pre-tax basis. – Health Savings Accounts (HSAs). Like an FSA, HSAs enable people to set aside pre-tax money for a wide variety of approved healthcare products and services. – Dependent Care Assistance Plan (DCAP) FSAs.
What is a section 125 employer health insurance plan?
In a section 125 plan or cafeteria plan, employees can pay qualified medical, dental, or dependent-care expenses on a pretax basis, which has the effect of reducing their taxable income as well as their employer’s Social Security (FICA) liability, federal income and unemployment taxes, and state unemployment taxes where applicable.