The Flexible Benefits Program allows employees a choice of paying for their share of employer-sponsored health, dental, vision, disability, supplemental insurances and group term life insurance up to $50,000 with pre-tax payments from their pay.
Paying Premiums for Employer-Sponsored Insurances with Pre-Tax Dollars
Employees who are enrolled in their employer-sponsored insurances can have their premiums paid with pre-tax dollars from their pay or with after-tax dollars.
When employees pay for employer-sponsored insurance premiums with after-tax dollars, the employee pays taxes first and then pays for their insurance premiums.
However, when your employees pay for their premiums with pre-tax dollars, the insurance premiums dollars are taken out of their pay before taxes. Because those dollars go for benefits instead of into their paycheck, the Internal Revenue Service does not consider them part of taxable income. As a result, your employee's taxable income is less. When taxable income is less, federal and state income taxes will be reduced and that means more take-home pay for your employees!
Calculation of Wages Without a Flex Plan
How an HSA is different than a FSA & HRA:
Storage Space
Email Accounts
Monthly Bandwidth
Databases
Developer
Gross Wages
Less FICA
Less Fed W/T
Less State W/T
Less Premiums
Net Wages
PREMIUM
FSA
X X X
X X X
X X X
X X X
X X X X X
Calculation of Wages Using a Flex Plan
How an HSA is different than a FSA & HRA:
Storage Space
Email Accounts
Email Accounts
Email Accounts
Monthly Bandwidth
Databases
Your text
Developer
Gross Wages
**Less Premiums
S.S & Medicare Wages
Less FICA
Less Fed W/T
Less State W/T
Less Premiums
Net Wages
PREMIUM
FSA
X X X
X X X X X
X X X
X X X
X X X
Your text
X X X X X
Premium Only Plan FAQs
Regular corporations, partnerships, S corporations, limited liability companies (LLCs), sole proprietors, professional corporations and not-for-profits can all save money on payroll taxes by establishing a Premium Only Plan. While regulations prohibit a sole proprietor, partner, members of an LLC (in most cases), or individuals owning more than 2% of an S corporation from participating in the Premium Only Plan, they may still sponsor a plan and benefit from the savings on payroll taxes.
By having your employer pre-tax your premium, you will save on Federal, State and FICA taxes on those premium dollars.
- Marriage
- Birth or Adoption of a child
- Divorce, Legal Separation or annulment
- Death of Spouse and/or dependent
- Termination of employment by employee
- Termination or commencement of employment by your spouse or your dependent
- You or your spouse take an unpaid leave of absence
- You, your spouse or dependent are switching from part-time to full-time (or vice-versa)
- A significant change in your family's health coverage attributable to your spouse's employment
- Dependent ceases to satisfy the requirements for unmarried dependents due to the attainment of age, student status or any similar circumstances as provided under the accident or health plan under which the employee receives coverage
- A change in the place of residence or worksite of the employee, spouse or dependent
- Health Insurance
- Dental Insurance
- Vision Insurance
- Supplemental Benefit Premiums (if there is no cash value)
- Group Term Life Insurance (for the employee up to a $50,000 policy)
- Long-term Disability
- Short-term Disability
- Some Cancer Insurances
Dependent Life Insurance and Long Term Care Insurance premiums are not allowed to be pre-taxed at this time.