Internal Revenue Code Section 125 allows
for employees to defer pre-tax dollars (compensation) towards
the payment of certain expenses. Employees are offered a "menu"
of options to choose from. The most popular options include
dependent care expenses (daycare), medical and dental premiums,
group life insurance premiums, and certain un-reimbursed medical
expenses. The amounts deferred are exempt from FICA, Federal
Income Tax and in some cases State Income Tax.