Various benefits of implementing section 125

Section 125 plan of the United States Court helps the employer as well as an employee to save a good amount of money. Coming to the details of this section, the employee can contribute a fixed amount of money towards the plan every month. Now, the contributions that are carried out are stored in an account from which the employee can pay for his or her allowed expenses. Allowed expenses include the premiums that one pays for their health insurance, the total cost for their dependents and medical supplies which are necessary for a month.

Section 125 Plan Benefits

As this contribution does not fall under any state, federal or Social Security taxes, the employee will be in a position to save anyway between 20 to 50% of the purchases. Section 125 also helps the employer in saving and will be a huge amount in the end when calculated for every employee who is contributing. Since the contribution does not fall under any taxes, the employer will no longer have to pay the matching contribution which creates a new platform of savings. According to calculations, the employer will be in a position to save 7.65 cents for every dollar that has been contributed by an employee.

Another benefit for the employer from section 125 is that workers compensation premiums can be lowered. Workers compensation premiums are set according to the payroll. But, as the employer is already contributing a particular amount of money towards the contribution fund, this will drastically lower the workers compensation premiums. Consult an insurance professional to check out whether implementing section 125 plans in the company will offer benefits in the long run. This completely depends upon the size of the business and the number of employees present in the organization. It is the best way to save huge sums of money for employer as well as for employee.

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