How Payroll Service Providers can help you to benefit from Section 125

Section 125 of the IRS code provides for employee salary withholding to cover the cost of certain qualifying types of insurance (Group Life, Medical, Accident, Disability Benefits, Group Legal Services and Dependent Care Assistance Insurance).

This has the effect of reducing the taxable income of employees while also benefiting the employer through reducing FICA matches.

The fact is, however, that many businesses do not make use of the benefits offered by Section 125 because they regard the administration associated with it as too complex.

This problem can be taken care off by making use of the services of a professional and competent payroll services provider. While it is true that IRS Section 125 compliance demands are stringent and complex, experienced payroll solutions providers will have been around the block a few times and can offer services tailored to your needs. Some of the services they provide include the following:

  • Offering advice and documentation to assist in the setting up of qualifying ‘premium only plans’
  • Providing employee enrollment forms
  • Administering employee enrollment and annual re-enrollment (if required)
  • Providing guidance and assistance with applicable non-discrimination testing
  • Administering payments to qualifying insurers
  • Providing detailed reporting to individuals and companies


The provision of information, guidance and a detailed electronic record means that payroll service providers can put companies in a position to benefit from the advantages associated with Section 125 while remaining on the good side of tax authorities.

Good payroll solutions providers are in a position to offer A-Z solutions when it comes to the administration of Section 125 payments. The ability to offer this kind of service should be a key consideration when you decide on a specific provider. This can be such a complex area that experience and a proven track record should be of critical importance. Making the choice to benefit from Section 125 should therefore be followed by the equally important choice of choosing the best possible service provider. AmCheck will expertly handle all of your payroll, HR and benefits administration, giving you the freedom to focus on your business.