Flex Tax Savings

Our flexible benefit and cafeteria plans operate under the provisions of the Internal Revenue Code Sec. 125 that allows employees to turn their benefit related expenses into tax savings when their employer provides a plan such as FlexWorks™.

Consider this small business with 20 employees. The employer pays the cost of employee health insurance. Eleven employees pay an additional $200 per month for dependent coverage. Four employees use daycare services averaging $4,000 per year and 12 average an additional $700 in out-of-pocket medical, dental and vision expenses.

Expenses Annual Amount Number Total
Group Health $2,400 11 $26,400
Out-of-pocket medical $700 12 $8,400
Day-care $4,000 4 $16,000
Total $50,800

Without our plan, these expenses would be paid with after-tax dollars. With the plan, they can be deducted before taxes, set aside and reimbursed to the employees-eliminating Federal and State income taxes, FICA and Medicare taxes. This will save employees 30% (or more) and employers 8%.

Employer Employee
Pre-tax amount $50,800 $50,800
Tax rate 8% 30%
Savings $4,064 $15,240

By simply permitting employees to pay their share of expenses with pre-tax dollars, the employer and employee save nearly $20 thousand each year!
There are some risks that should be managed--Benefit Innovations, Inc. will show you how. Also, tax savings are great but only the beginning of the savings that FlexWorks™ will generate.



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