Tax Savings for employees
Premium Only Plans
Section 125 Premium Only Plans or POP allow employers to reduce payroll taxes by making one simple adjustment to the payroll process. Under a Section 125 Premium Only Plan employees elect to pay their portion of health insurance premiums on a pre-tax or tax-free basis rather than on an after-tax basis. This creates savings for both the employee and the employer.
Employees save 22.65% to 40% of their pre-tax Section 125 premium deductions in just federal income taxes alone. The actual tax savings are on city, state, and federal income taxes, including Social Security and Medicare taxes on all money employees use to pay for their portion of insurance premiums. Under a Section 125 POP employees take-home pay is increased which helps reduce the high cost of providing health coverage for family members.
Healthcare Spending Accounts
A plan that allows employees to reduce their salary to pay for expenses not covered by their insurance such as co-pays, eye glasses, contact lenses, crowns, root canals, deductibles, and co-insurance.
Premium Reimbursement Accounts
An option for employees with individual health insurance policies to set aside money in additional account similar to the dependent care account to pay the premiums on a before tax basis.
Dependent Care Accounts
A way for both employees and employers to save money on taxes.
Flex Spending accounts (flex dollars)
A Flexible Spending Account (FSA), also called a flex plan or reimbursement account, is an employer-sponsored benefit that allows you to pay for eligible medical expenses on a pre-tax basis (there are also similar accounts for dependent and child-care expenses).
If you expect to incur medical expenses that won't be reimbursed by your regular health insurance plan, you should be taking advantage of your employer's FSA if one is offered.
An FSA saves you money by reducing your income taxes.
The contributions you make to a Flexible Spending Account are deducted from your pay BEFORE your Federal, State, or Social Security Taxes are calculated and are never reported to the IRS. The end result is that you decrease your taxable income and increase your spendable income. You can save hundreds or even thousands of dollars a year.
Parking & Transit Reimbursement Accounts
Section 132 of the IRS code makes it possible for you to provide your employees with a means to save tax dollars on qualified transportation expenses. These are the expenses that you incur in normal course of commuting to and from work. Participation in a Transit Reimbursement Account allows your employees to set aside pre-tax dollars for qualified parking expenses, transit passes or vanpooling expenses.
