Section 125 Pre-Tax Insurance Program

Section 125 is a pre-tax program that is offered through the IRS. Section 125 allows the employee to have certain payroll deductions deducted from their paycheck prior to taxes being taken out. This can save the employee up to 20% on his payroll taxes. The employer also saves money by the taxes that they have to match dollar for dollar for the employee. Not all benefits should be pre-taxed.

Some benefits that can be pre-taxed can be: health insurance premium, dental, life insurance less than 50k, cancer, accident, hospital indemnity and vision. Disability coverage should not be pre-taxed, nor should life insurance over 50K. Some insurance companies offer this service at a charge to the employer for set up fees. AWD and AFLAC generally do not charge fees for this. It is always recommended that an employer gets this coverage especially if they are a growing company and their payroll taxes are going to continually increase. Applying for this coverage usually involves simply completing a one page application.