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Section 125 Plans
Employers Reduce Payroll Taxes While Employees Increase Take-Home Pay
Implementing a Section 125 FlexFund plan will reduce payroll taxes for you, the employer, and increase the take-home pay for your employees. FlexFund is a flexible compensation benefit plan that follows the Internal Revenue Service Code Section 125.
FlexFund allows employees to pay for qualified expenses, such as medical premiums, medical expenses, and dependent care expenses, with pre-tax dollars through payroll deduction. The employer has the option to choose which benefits shall be available to the employees.
What are the advantages for the employee?
The advantage is an increase in spendable income. Note the following example:
Pre Tax Example |
Without Flex Fund |
With Flex Fund |
Gross Pay (per month) |
$1,800.000 |
$1,800.000 |
Pre-Tax Benefits: |
Medical/Dental Premiums |
0.00 |
100.00 |
Expenses |
0.00 |
80.00 |
Dependent Care Expense |
0.00 |
200.00 |
Subtotal |
$1,800.00 |
$1,420.00 |
Wages Subject to Tax |
$1,800.00 |
$1,420.00 |
Federal Tax (15%) |
270.00 |
213.00 |
FICA Tax (7.65%) |
137.70 |
108.63 |
State Tax (3%) |
54.00 |
42.60 |
After Tax Income |
$1,338.30 |
$1,055.77 |
Less: |
Medical/Dental Premiums |
100.00 |
0.00 |
Medical Expenses |
80.00 |
0.00 |
Dependent Care Expense |
200.00 |
0.00 |
Spendable Income |
$958.30 |
$1,055.77 |
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Net increase in Take Home Pay:
$97.47/mo
$1,169.94/year
What are the advantages for the employer?
Controls Costs
Addresses the need of a diverse work force
Contact Kris Garnhart to discuss a Section 125 plan for you.
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