Do I Have to Allow Employees to “Opt Out” of Pre-Tax Deductions?

Last Updated on January 8, 2019 / Benefits & Compensation

Question:

If I have an employer that has a premium only (pre-tax / IRS Section 125a premium deduction plan) – do I have to allow employees the opportunity to “opt out” of the pre-tax deduction?  In other words, they want the premium to come out post-tax….do I have to allow that?

Answer:

Yes, employees must be given the option to participate in the pre-tax deduction and may elect to opt-out of this annually.  Depending on who you have your plan with, many offer an election form that should be completed annually opting “in” or “out” of the program.  If not, be sure employees put the request in writing so it cannot be questioned later.

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