Why would a company no longer deduct employees medical insurance premiums before tax?



They just announced that deductions from pay will no longer be on a pretax basis. The question is: In what specific way does this benefit the company? Also, what is the effect on employees at tax time?

Why would a company no longer deduct employees medical insurance premiums before tax?
Rate these answers

3 Replies to “Why would a company no longer deduct employees medical insurance premiums before tax?”

  1. Sounds like they got rid of their cafeteria 125 plan. Company saves in maintaining the maintenance fees of the plan. This will effect you at tax time because it will appear that you are earning more money and therefore taxed at a higher rate…you won’t have the tax shield of taking money off the top and then paying taxes on a lower gross income.



  2. Most companies are shocked at how expensive the section 125/cafe plans were to operate. If they offered an FSA, too, they often had to pay for medical expenses and then never got reimbursed if the employee quit the day after they had their teeth fixed.





Leave a Reply

Your email address will not be published. Required fields are marked *