Why Businesses Need a Section 125 Plan with Limited Medical Plan

Companies nationwide are learning how to offset high insurance premiums by reducing payroll taxes with USNow's Limited Medical Plan and Section 125 Plan. By implementing together, employer and employees save big on payroll taxes.

Plano, TX (PRWEB) October 30, 2008 -- USNow LP (www.usnow.com) a national marketer of limited medical benefit plans for over 10 years, teaming with brokers nationwide, allows business owners to save taxes and reduce expenses on premiums.

Section 125 Cafeteria Plans have been a popular option for employers and employees, as the plan deducts premiums on a pre-tax basis. An employer saves $.0765 on every dollar pre taxed by an employee. Employees save an average $.30 on every dollar pre taxed. On average an employer can save $300 per employee in payroll taxes.

Additionally, Limited Medical Plans (LMPs) are a popular choice for employers wanting to offer reasonably priced medical insurance to their workforce who are not eligible for the company health plan or who simply cannot pay for the high cost of traditional insurance. Limited Medical Plans are a great fit for part-time and hourly workers because they are affordable and allow this uninsured population access to basic health care. Now these employees can see a doctor, fill a prescription, have lab and x-ray tests performed, without enormous out-of-pocket expenses.

But when you blend a USNow Limited Medical Plan and Section 125 Plan together, the savings are even bigger for both the employer and the employee.

What is a Section 125?

A Section 125 Cafeteria Plan sometimes known as a Premium Only or Flexible Spending Plan allows employees to pay for certain medical expenses on a pre-tax basis. By paying for these expenses before being taxed, employees lower their taxable income, pay less in taxes and increase their take home pay. These expenses include:

• Employee contributions toward medical-related insurance premiums.

• Medical-related expenses such as deductibles, co-insurance, co-pays, or uninsured medical expenses.

• Dependent care expenses.

What are the benefits of a Section 125 plan for employers?

An employer saves the matching 7.65% (FICA) on every dollar that an employee runs through a Section 125 plan. Employers are also able to realize other benefits such as:

• Cost Control - An employer can control the company's share of medical costs, without limiting employee choices.

• Address the needs of a diverse workforce - An employer can offer individually tailored benefits at little or no additional cost to the company.

• Recruit and Retain Quality Employees - An employer is viewed in a positive light by current and prospective employees because of a benefit package is being provided with the employee's interests in mind.

• Depending on the particular state, there may also be a workers' compensation tax savings.

All employee pre-tax premium contributions are subtracted from the group's total payroll, which saves the employer on FICA and other payroll-related taxes.

What are the benefits of a Section 125 plan for employees?

Benefits of a Section 125 plan are paying for medical expenses or dependent care with pre-tax or tax-free dollars. Conservatively, employees can save 15% to 35% on federal income taxes alone that they set aside in a Section 125 account. When factoring in city, state, Social Security and Medicare (FICA) the tax savings are a huge plus for today's family's to increase cash flow and to help defray the high cost of medical insurance and dependent care.

Limited Medical Plans are a great match for a Section 125 plan. Not only do the employer and employee save money, but they help employers recruit and retain quality employees.

For additional information on USNow, visit www.usnow.com or call 800-694-9888.

About USNow

A nationally recognized leader in the field of benefits, USNow pioneered the concept of managed limited benefit plans in the mid-1990's and is one of the fastest growing and dynamic limited medical organizations in the United States.

USNow, based in Plano, TX, provides a total solution to brokers and clients, from enrollment to fulfillment, coupled with superior patient advocacy and customer service. Members get quality healthcare they deserve.

USNow's group limited medical benefit plans are fully insured and underwritten by Pan-American Life Insurance Company. New Orleans based Pan-American is rated A- (Excellent) by A.M. Best and has been a leading international insurance company for more than 95 years.

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