Before or After Tax
Last updated: 10/01/18
You can decide how your monthly health premiums are taken from your paycheck, either before or after tax.
In the Premium-Only Plan (POP), a part of IRS Code Section 125, allows you to elect to pay your medical, dental and vision insurance premiums before or after taxes are deducted. If you choose the before-tax option, your premiums will be deducted from your pay before taxes are calculated, reducing your taxable income, saving you money by withholding fewer dollars for federal, state and Social Security taxes. If you choose the after-tax option, your premiums will be deducted after your pay has been taxed.
- You will be given the opportunity to make your election as you enroll in your CU Health plans in your employee portal.
- If you do not make an election, your premiums will be deducted after tax.
- Once you make this election, your enrollment will continue for the plan year. A new election can be made only during Open Enrollment.
- If you have dependents enrolled in university benefits who do not qualify as federal tax dependents for health coverage purposes, their premiums are not eligible for the POP, and you may incur imputed income.
- If you are paying into the PERA retirement plan, and you are within 3-5 years of retirement, keep in mind that your PERA defined benefit pension plan is calculated by your age, years of service and highest average salary. Anytime you make a before-tax deduction from your pay, you are lowering your taxable income, which will impact your highest average salary.
Employee Services does not provide tax advice to employees. Please contact your personal tax advisor, the IRS, SSA, State of Colorado, or local government directly for professional tax advice.
Find helpful tax information from the IRS here.
What is a Cafeteria Plan?
A cafeteria plan is a tax-savings benefits program designed to take advantage of Section 125 of the Internal Revenue Code. It allows you to pay certain qualified expenses on a pre-tax basis, reducing your taxable income. This includes CU's Premium-Only Plan and two Flexible Spending Accounts.