Section 125 - Pretax vs. Post-tax

Section 125 applies to active employees only.

If you enroll for medical, dental or supplemental insurance coverage, you must choose between paying with pretax or post-tax dollars. Below are some points to consider as you make your decisions.

Pretax Deductions

If you choose to pay for coverage with pretax deductions:

	At the end of the year, your W-2 may reflect a reduced salary for tax purposes.
	You may pay less in federal income taxes on your paycheck and see an increase in your take-home pay each pay period.
	You may make a change to your coverage during the year only if you experience a qualified family status change. The change in benefits must be consistent with the qualified family status change. See the “Qualified Family Status Change” section.

Post-tax Deductions

If you choose to pay for coverage with post-tax deductions:

	You will not receive a tax benefit.
	You will not reduce your taxable income.
	You may drop coverage for you or your eligible dependents during the year.

 

For Example

Below is an example of how you may benefit from paying for benefits with pretax dollars. The example is based on a married couple with two withholding allowances in 2004 .