Section 125
Section 125 is a portion of the Internal Revenue Code that allows a company's employees pre-tax spending for benefits. It is divided into three main areas:
Premium pre-tax: allows employees to pay their share of the health, dental, and life insurance premiums with before-tax dollars.
Dependent care: allows employees to set aside $5,000 on a pre-tax basis for daycare.
Flexible spending accounts: allows employees to set aside some of their own money to cover additional benefits such as vision care, orthodontia, fitness clubs, etc., on a pre-tax basis.