The Section 125 Plan provides tax savings by reducing employee medical premiums from gross salary prior to calculation of federal income and Social Security taxes, as allowed under Internal Revenue Code (IRC) Section 125.
The Section 125 Plan reduction does not reduce the salary on which your maximum deferral limit for the Voluntary Investment Program is calculated. The reduction does, however, lower the salary on which both Social Security and unemployment benefits are calculated. While the actual impact on the benefit calculation is typically very minor, if you are concerned and you are close to beginning a Social Security benefit, you may wish to consider waiving the Section 125 Plan for your medical premiums. They would then be taken as an after-tax deduction. Contact Social Security for more about how your Social Security income is calculated.
Newly eligible employees may elect to waive Section 125 at the time they choose a medical plan; otherwise, it can only be changed during the annual autumn open enrollment period, for a January 1 effective date.
Your medical premiums will automatically be taken as pre-tax unless you submit a Section 125 Medical Plan Waiver form to the Benefits Office.
For more information, contact the Internal Revenue Service or Benefits & Work/Life.
Medical & Dental
Insurance Topics
Copyright © 2007 University of Washington
