Section 125 plans were
created to give you an incentive to provide your employees
Under IRS Section 125,
employers are allowed to offer employees nontaxable benefits
on expenses such as out of pocket healthcare, dependent care
and group insurance benefits. Employees deduct the cost of
these items regularly from their gross salary and avoid
paying federal, state*, or FICA taxes on this deducted
Section 125 plans
benefit your business as dollars that flow through the plan
are exempt from matching FICA, FUTA, SUTA and Workers'
Compensation* premiums on these deductions. You also benefit
through increased company morale. Everyones happy because
youre effectively giving your employees a raise without the
cost of the raise being passed on to them or borne by you.
There are many options
in the plan design of §125 plans, including flexible
spending accounts, healthcare savings accounts and premium
only plans, known as POPs.
*Tax savings can vary
depending on the state/tax jurisdiction.
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