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Section 125 (Cafeteria
Plans)
Section 125 plans can offer tax deductions for both the employer and
employee if:
- You have a written document
- Have rights enforceable under ERISA
- Proper employee notification
- Benefits are permanent and for the exclusive benefit of employees
The tax benefits for the employer equal 7.65% of the taxable wage base
set aside by employees under Section 125 plans. This typically pays for
administration expenses. Tax benefits for employees include their 7.65%
FICA expense as well as State and Federal income tax. In total this may
be over 40% of every dollar set aside for reimbursement.
| Group Health
Products and Services |
| Available Benefits |
Comments |
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This section allows the portion an employee pays
for
group medical benefits to be tax deductible – either as premium-only
or in combination with the next two categories.
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Medical Reimbursement
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Out of pocket medical expenses for items not
covered
under insurance like deductibles, eye glasses, and
dental expenses.
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Dependent Care
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Up to $5,000 of expense for dependent care may
be deducted most favorably under this program. This program is often
better than child care credits available under personal tax returns.
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Transportation Expenses
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A recent concept similar to the Cafeteria Plans,
but under different legislation, that provides tax benefits on qualified
parking and qualified public transportation expenses.
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For further information contact
us!
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303.893.0300
• Fax: 303.861.8147 • Email: info@geminigrp.com • 789 Sherman St.,
Ste. 400, Denver, CO 80203