A Section 125 Plan provides a tax-saving way to pay for eligible medical or dependent care expenses. The funds are automatically deducted from your paycheck on a pre-tax basis.
Here’s How It Works
A Section 125 Plan reduces your taxes and increases your spendable income by allowing you to deduct the cost of eligible benefits from your earnings before tax. Plus, the plan is available to you at no cost, and you’re already eligible – all you have to do is enroll.
The savings you may experience with a Section 125 Plan are outlined in the example below. For instance, you could potentially take home about $70 more each month if you participated in your employer’s Section 125 Plan – that’s a savings of $840 a year!
You cannot change your benefit elections for the plan year unless the benefits office receives notification in writing within 31 days of the status change. If the benefits office is not notified within 31 days of the status change, no benefit change can be made until the next annual open enrollment.
IRS specified changes in family status include:
- Change in legal married status
- Change in number of dependents
- Termination or commencement of employment
- Dependent satisfies or ceases to satisfy dependent eligibility requirements
- Change in residence or worksite that affects eligibility for coverage
