Tax education center

A Section 125 plan is the written employer plan that allows W-2 employees to pay for certain qualified benefits — group health, dental and vision premiums, health FSAs, dependent care accounts, and in some designs HSA contributions — with pre-tax dollars instead of after-tax dollars. It is the legal wrapper, not a benefit by itself.

• Requires a written plan document adopted before the plan year begins.
• Nondiscrimination testing matters more as headcount grows past 10.
• Owners of S corporations and partnerships face participation limits.
• State payroll tax treatment varies and should never be assumed.

No promised per-employee savings figure is reliable without a review of your actual payroll, census and plan documents. Educational information only.