Save Taxes Through A Flexible Benefit Plan

Employees may choose various benefit options and the cost can be paid on a pre-tax basis. The plan, known as a flexible benefit plan (or cafeteria plan) is defined under section 125 of the Internal Revenue Code. The cost of the benefits are not taxable to the employee for federal income tax and FICA and is not taxed to the employer for FICA and FUTA.

The simplest plan would be a premium only plan (POP), where the health insurance premiums your employees are already paying become tax free. Other popular options are deductions for actual medical expenses such as doctor visits, dental, orthodontics and eye care (that are not covered under medical insurance) and dependent care expenses.

Examples of Tax Savings

The employee is assumed to be in the 27% tax bracket and has not earned in excess of $84,900 (the social security limit) for the year.

Employee saves $ 2,398 in taxes. Employer saves $ 529 on its share of the FICA tax.

A flexible benefit plan creates a win-win situation. The employee gets a significant tax savings while the cost of implementing and administrating the plan is usually covered by the employers FICA tax savings. For a double tax break, use the savings from a flexible benefit plan for a 401(k) plan to save for retirement.

A D Computer has the advanced computer software that is required to make the deductions, calculate the proper taxes and provide the reporting to your plan administrator.

A D Computer has working alliances and relationships with a number of professional Flex Plan Administrators. If you are starting a new plan or need administration of an existing plan, we can help. Whether you’re looking for specific contribution reports, a data file or even a seamless exchange of payroll data... we have various solutions available.

A D COMPUTER
3939 West Drive
Center Valley, PA 18034
610-797-9500
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