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Pre-tax Premium Conversion
Section 125 of the United States Tax Code allows you to exclude your Medical, Dental, and Vision premiums from your taxable income. Therefore, you may elect to pay these premiums on a pre-tax basis and therefore reduce the amount withheld from your paycheck for Federal, State and FICA (Social Security/Medicare) taxes. Individual savings will vary based on your income, number of exemptions, and your tax bracket.
At the time you first enroll in Medical, Dental, or Vision you will elect how you want the premiums deducted. While after-tax is the default, the majority of employees choose to pre-tax their premiums. But be cautious. Once you elect to pre-tax, you cannot drop your coverage until the end of the year, or unless you are within 31 days of a qualified event. Qualifying events are defined by the IRS and include marriage, birth of a child, divorce and death.
Additional Pre-Tax Forms
University of Arkansas for Medical Sciences
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