IRS Section 125 plans allow school employees to tax shelter their payroll deductions for their medical premium contribution. Also, employees may tax shelter an annual amount they elect to put into a Flexible Spending Account (FSA) for:
- Out-of-pocket medical and dental expenses, including prescribed medicines and drugs, up to $2,500; and/or,
- Out-of-pocket dependent care expenses up to $5,000.
Implementing a Section 125 Plan enables an employee to avoid taxes. The premium contribution amount and the amount the employee elects to contribute to the Medical portion of the FSA are excludable from federal withholding, FICA, Pennsylvania state tax and local earned income tax. The amount the employee elects to contribute to the Dependent Care portion of the FSA is excludable from federal withholding & FICA only (in Pennsylvania). In addition to the employee tax sheltering both the premium contribution and their contribution to the FSA, the employer saves FICA taxes.
Kades-Margolis has partnered with CBIZ, one of the nation’s leading providers of business services and Section 125 Plan Administrators. We have implemented Section 125 flexible spending plans for more than 200 school districts across Pennsylvania. Kades-Margolis will provide a 125 Plan Document to the district and will also provide in-service programs to eligible administrators, teachers, and/or support staff about the Section 125 program and the significant tax savings.
Please contact our Employer Plans Division at (800) 433-1828, ext. 3 or email us at firstname.lastname@example.org for more information.