It’s Like An Instant Raise!
Created by Congress during the disco years of the 1970’s, pre-tax plans are one of the smartest things a company can utilize to save their employees and themselves money! These plans allow for the use of pre-tax money to pay for specific medical expenses, as well as certain benefits. EasyChoice 125 Plans are powered by MHM Resources, an industry leader and respected PayChoice partner. Plans typically come in the following two basic forms.
Premium Only Plans
POPs reduce employee and employer taxes. By paying their share of group insurance premiums with tax-free dollars, employees save 25% to 40% depending on their tax bracket. Employers typically save on the matching Social Security (FICA) and Federal unemployment taxes of nearly 8%. In many cases, the employer’s tax savings can actually pay for the plan administration!
Flexible Spending Account Plans
Sometimes they are referred to as cafeteria plans, flex plans, section 125 plans, or FSAs. However you refer to it, our Flexible Spending Account Plans include the benefits of a POP, and let employees set aside a certain amount of each paycheck into a healthcare reimbursement account — before paying income taxes.
During the year, participants have access to this account for reimbursement of expenses — not covered by insurance — that they regularly pay for, such as:
- Deductibles, co-pays, and other eligible expenses not covered by insurance
- Prescription drugs and medical supplies
- Over-the-counter drugs that are medically necessary like allergy medications, aspirin, or antacids
- Dietary supplements with doctor's letter of medical necessity
- Dental services, orthodontics, and dentures
- Eyeglasses, contacts, solutions, and eye surgery
- Weight-loss programs with doctor's letter of medical necessity
- Weight-loss over-the-counter drugs with doctor's letter of medical necessity
- Chiropractic services
- Vitamins with doctor's letter of medical necessity
- Psychiatric care and psychologist's fees
- Smoking-cessation programs
- Smoking-cessation over-the-counter drugs
- Adult and child daycare services
- Adoption expenses
- Transportation and parking expenses (Section 132 Plan)
When employees use tax-free dollars to pay for these expenses, they realize an increase in their spending power, and big tax savings.
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