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If you need clarification on any issue, please call us.
Here's how it works
No matter how many people your company
employs, you can take advantage of IRC Section 125 when you establish a
P.O.P. Plan. And, when you change your payroll deduction by implementing the
Plan, you'll save money! How much depends on the amount your employees now
spend for eligible benefits. The example below shows a comparison of a
sample company and the advantages of using pre-tax dollars under a P.O.P.
Plan
|
Employer Savings |
After
Tax |
Pre-tax |
Savings |
|
|
Sample annual
payroll |
$250,000 |
$250,000 |
|
|
|
Less employee
premium contributions |
0 |
30,000 |
|
|
|
Taxable payroll |
250,000 |
220,800 |
|
|
|
FICA payroll
taxes (at 7.65%) |
19,125 |
16,830 |
$2,295 |
annually |
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In our example, P.O.P. saves the employer
$2,295 Annually! |
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Use this sample worksheet to calculate your
estimated tax savings! |
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Total monthly employee premium
contribution: |
$ |
|
|
Current FICA payroll taxes (at 7.65%): |
x .0765 |
|
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|
Monthly employer tax savings: |
$ |
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Total Months: |
x 12 |
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Annual employer tax savings: |
$ |
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Employee
Savings |
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Employees can easily see that pre-tax
dollars go further that after-tax dollars when paying IRS allowable
insurance premiums. Here's an example of a married individual, earning
$28,000 and paying $1,200 for dependent insurance coverage: |
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Example |
After
Tax |
Pre-tax |
Savings |
|
|
Income |
$28,000 |
$28,000 |
|
|
|
Less Medical
Premiums |
0 |
1,200 |
|
|
|
Taxable Income |
28,000 |
26,800 |
|
|
|
Estimated Taxes
- 28% |
7,840 |
7,504 |
|
|
|
Income after
Taxes |
20,160 |
19,296 |
|
|
|
Less Insurance
Premiums |
1,200 |
0 |
|
|
|
Take Home
Income |
$18,960 |
$19,296 |
$336 |
annually |
The difference of $336 illustrates the advantage of
paying insurance premiums with
pre-tax dollars.
Please Note
Information on this Web site is only intended as general summary
information that is made available to the public.
Insurance Matters' example of pre-tax information should not be construed as investment advice. Please
consult one of our Agents for specific information and always consult a CPA
and an Attorney before you purchase Insurance.
|
Steve Lohrig, CLU, ChFC
President / Broker
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Suite 210
2918 Austin Bluffs Parkway
Colorado Springs, CO 80918 |
719 955-0606 Tel
719 955-0609 Fax
slohrig@insurancematters.org
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