26 Feb How The Champ Plan Leverages Section 125 to Boost Employee Benefits & Savings
Understanding Section 125 & Its Role in The Champ Plan
A Section 125 Plan, also known as a cafeteria plan, allows employees to pay for qualified benefits with pre-tax dollars. This results in lower taxable income, reducing payroll taxes for both employees and employers.
The Champ Plan is strategically designed to integrate with the Section 125 plan, helping employees maximize their benefits while minimizing their tax burden. This unique approach allows businesses to offer a valuable benefits package without significantly increasing costs.
Key Benefits of The Champ Plan & Section 125
Increased Take-Home Pay for Employees
By deducting contributions pre-tax, employees lower their taxable income, which means they take home more money each pay period. The Champ Plan ensures that employees can enjoy healthcare benefits without worrying about excessive out-of-pocket costs.
Reduced Payroll Taxes for Employers
Employers benefit from lower payroll tax obligations when offering Section 125 benefits. This reduction in taxes provides significant cost savings, allowing businesses to reinvest in their workforce.
$0 Copays on Essential Healthcare Services
Through The Champ Plan, employees gain access to:
- $0 copays for primary and urgent care visits
- $0 copays for unlimited virtual direct primary care
- Unlimited prescription coverage on formulary drugs
All of these benefits are made possible under a Section 125 structure, making healthcare more accessible and affordable.
Compliance with IRS Regulations
The Champ Plan follows IRS guidelines under Section 125, ensuring businesses remain compliant while offering competitive benefits. Since pre-tax benefits must adhere to IRS rules, employees can only make changes outside open enrollment if they experience a Qualifying Life Event (QLE).
How Employees Benefit from The Champ Plan’s Section 125 Integration
To illustrate the impact, let’s look at an example:
Before Enrolling in The Champ Plan:
- Gross Salary: $3,000/month
- Taxable Income: $3,000
- Taxes Paid (22%): $660
- Net Take-Home Pay: $2,340
- Out-of-Pocket Healthcare Costs: $200
- Final Take-Home Pay: $2,140
After Enrolling in The Champ Plan:
- Gross Salary: $3,000/month
- Pre-Tax Contribution to The Champ Plan: $200
- New Taxable Income: $2,800
- Taxes Paid (22%): $616
- Net Take-Home Pay: $2,184
- Out-of-Pocket Healthcare Costs: $0
With The Champ Plan, the employee saves on taxes and eliminates healthcare costs, ultimately increasing their take-home pay.
Why Employers Should Offer The Champ Plan
Employers who implement The Champ Plan can:
- Enhance employee satisfaction and retention
- Provide cost-effective benefits without increasing overhead
- Improve recruitment efforts by offering a competitive benefits package
- Reduce taxable payroll, leading to lower employer tax liabilities
Ready to Maximize Benefits with The Champ Plan?
By leveraging Section 125, The Champ Plan provides a smarter way for businesses to offer top-tier benefits while saving money. If you’re an employer looking to enhance your benefits package or an employee interested in maximizing your take-home pay, The Policy Shop can help!
Contact The Policy Shop today to learn how The Champ Plan can benefit you.