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Tax Preference for Employer-Sponsored Insurance

Under the current tax code the amount employers spend on health insurance is tax deductible and not considered taxable compensations; similarly, employees’ contributions toward their premiums can be made with pre-tax dollars. Individuals purchasing insurance on their own do not benefit from the same preferential tax treatment.

Section 125 Plan

A plan that allows for employees to pay for health insurance premiums and receive certain benefits on a pre-tax basis.