Section 125 Plans

Offered through Paychex, Inc.

Enhance your group health insurance benefits and lower your taxes with a Premium Only Plan (POP) or Flexible Spending Account (FSA). These section 125 plansNamed after section 125 of the Internal Revenue Code — also known as cafeteria plans. allow employees to pay certain benefits on a pretax basisPretax payments are made from an employee's paycheck before taxes are taken out. This effectively reduces the employee's taxable income, and the employer's FICA payroll taxes., effectively reducing their taxable income — and your Social Security (FICA) liability.

Section 125 Plan Comparison

While a Paychex FSA includes a POP and covers additional qualified expenses, both are powerful tax saving tools.

Section 125 Plan Comparison
	POP	FSA
Pretax premium payments		In combination with a POP
Pretax payment of qualified expensesMedical, dental and dependent care expenses: including co-payments, deductibles, and some over-the-counter medications. not covered by your benefit plans
Reduces employees' FICA, federal, and where applicable, state and local taxes
Reduces employers' FICA payroll taxes* by effectively lowering employee taxable income
Can be integrated with Paychex Payroll for automated contribution deductions and simplified plan administration
A powerful tax incentive to help recruit and retain quality employees
Easy claim submission via secure website or mail	N/A
Optional reimbursement methods: - Direct deposit - Check signing and mailing - Paychex FSA Debit Card
Dedicated toll-free support line

Section 125 State Regulations

The following states require section 125 plans for employers who meet certain requirements. For more information, click on the states below or consult your tax advisor.

• Connecticut
• Massachusetts
• Minnesota
• Missouri
• Rhode Island

For information about section 125 regulations in other states, please consult your tax advisor.

Related Accounts

• Health Savings Account (HSA)
• Healthcare Reimbursement Account (HRA)

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