Section 125 Plan: Maximizing Take-Home Pay

Learn how The Champ Plan presented by The Policy Shop works from a payroll perspective. Discover how pre-tax deductions and indemnity benefits can maximize your take-home pay while providing essential healthcare benefits. (The Champ Plan: Payroll 101 – Understanding Your Benefits)

In this article, we’ll take a deep dive into how The Champ Plan presented by The Policy Shop works from a payroll perspective. After briefly touching on what to expect during your enrollment period, it’s time to understand the foundation of this plan and how it impacts your paycheck.

What is The Champ Plan?

The Champ Plan presented by The Policy Shop is a personalized, self-funded, self-insured cafeteria plan designed to help you access better healthcare benefits while putting more money back into your paycheck. What sets The Champ Plan apart from other healthcare programs is its indemnity-type benefit, which helps cover the cost of the plan and gives you more take-home pay with every paycheck.

The Champ Plan presented by The Policy Shop is designed to complement your primary healthcare insurance. While it’s not mandatory to have existing major medical insurance to participate, having a primary plan can enhance the value of The Champ Plan‘s offerings.

Understanding a Cafeteria Plan

But first, let’s understand what a cafeteria plan is. It’s a benefit offered by your employer that lets you choose from a variety of health benefits on a pre-tax basis. Cafeteria plan refers to a benefits plan that allows employees to choose from a variety of benefits.

• Section 125 Plan: The Champ Plan is based on the Section 125 Plan, which was introduced to the Internal Revenue Code in 1978. This allows employees to make pre-tax contributions toward various benefits, including health-related services.
• Cafeteria Plan Structure: Employees are given a “cafeteria” of options (think of it like choosing items from a buffet) to select the benefits that fit their needs. The money deducted from your paycheck to fund these benefits is done on a pre-tax basis, which reduces your taxable income and, ultimately, the taxes you owe.

Pre-Tax Deductions Explained

So, what is a pre-tax deduction? A pre-tax deduction is an amount that is deducted from your paycheck before taxes are calculated. The benefit? This lowers your taxable income, which in turn reduces the amount of taxes you owe. Essentially, the more you put into your Champ Plan, the less taxable income you have, meaning you pay less in taxes.

But here’s the key: because your pre-tax deductions reduce your gross income for tax purposes, you can’t claim these deductions again on your tax return. You’ve already received a benefit from not being taxed on those funds.

How The Champ Plan Works in Your Payroll

Every pay period, two key items will appear on your paycheck:

1. Pre-Tax Deduction: This line item reflects the portion of your gross income that you contribute to The Champ Plan. By participating in this plan, your taxable income is reduced, leading to lower taxes.
2. Indemnity-Type Benefit Addition: This is a non-taxable benefit that is added to your paycheck. It’s designed to increase your net take-home pay and is a reward for engaging with the Champ Plan’s predictive medicine model.

What is Indemnity?

In the context of The Champ Plan presented by The Policy Shop, indemnity means compensation for a loss or cost. Essentially, you are compensated (in the form of increased take-home pay) for actively engaging in your health journey through the Champ Plan.

Indemnity is a concept where one party compensates another for a loss or cost incurred.

Participation is simple: just engage with the platform once every 30 days by completing a health activity, like watching a short video or reading an article. Doing so ensures you receive the indemnity-type benefit on your paycheck.

How Your Paycheck Changes with The Champ Plan

Let’s see how The Champ Plan presented by The Policy Shop can affect your paycheck:

1. Before the Champ Plan: Without the plan, you might be contributing up to 30% of your gross income toward taxes (e.g., if your taxes are at 30%, you only take home 70% of your pay).
2. With the Champ Plan: By contributing to The Champ Plan, your taxes decrease significantly. In some cases, taxes can drop from 30% to 17% or even lower, depending on your participation. Additionally, you receive that indemnity-type benefit which boosts your net pay.

Benefits of The Champ Plan Presented by The Policy Shop

Here’s a breakdown of the perks you’ll enjoy through The Champ Plan:

• $0 Primary Care and Urgent Care Visits: Unlimited access to primary care and urgent care, with no out-of-pocket costs.
• Affordable Prescriptions: Access to $0 and $1 generic prescriptions, ensuring you pay as little as possible for the medications you need.
• Virtual Primary Care: Enjoy unlimited virtual consultations for primary care, for yourself and your family, included in your plan.

Need Assistance?

We know that payroll can be complex, and understanding how pre-tax deductions and indemnity payments work is crucial. That’s why our benefits counselors are available to walk you through the process. Feel free to reach out to the member hotline if you need any clarification.

Our counselors are available Monday through Friday, speaking over 65 languages and offering support in over 200 written languages. We’re here to help you make the most of your Champ Plan benefits.

We’re here to support you every step of the way in your health and wellness journey.

Ready to start taking full advantage of your Champ Plan?

Contact The Policy Shop today to learn more