22 22 PRE - TAX BENEFITS I Section 125 Plan X YZ C O MPAN Y operates a Premium Only Section 125 Plan, which allows you to reduce your total taxable income by your portion of group insurance premiums. In effect, this is just like getting a raise - your withholding taxes are reduced, and your take - home pay increases! Example: Employee earning $30,000 annually, paying $200/month for benefits Without Pre - Tax Benefits With Pre - Tax Benefits Gross Pay $30,000 $30,000 Insurance Deductions/Payments $0 $2,400 Taxable Income $30,000 $27,600 Taxes at 25% $7,500 $6,900 After - Tax Income $22,500 $20,700 After - Tax Payment for Benefits $2,400 $0 Take - home Pay $20,100 $20,700 INCREASE IN TAKE - HOME PAY +$600 VA LU E OF PR E - TAX B EN EFITS BENEFITS GUIDE