Business Tax Strategy · ProfitGuard Plus
What happens at tax time?
Less than people expect. For the employee, the pre-tax election shows up as lower taxable wages, and the reimbursement for medical care is not income under Section 105(b). There is nothing new for them to file. For the employer, the payroll tax bill is lower and the plan documents are ready for the CPA.
Quick answer
- The employee's pre-tax election lowers the wages their taxes are figured on. That is already reflected in payroll during the year.
- The SIMRP reimbursement is excluded from the employee's income under Section 105(b), because it pays for medical care under Section 213(d).
- There is nothing new for the employee to file.
- The employer's FICA is lower on every payroll during the year, so there is no year end surprise in either direction.
- The plan documents are written, reviewed by CPAs and ERISA attorneys, and available to your CPA.
- The plans that do create tax time surprises are the ones that run an indemnity premium through the plan before taxes. ProfitGuard Plus does not.
The employee's side
During the year, the pre-tax election lowers the wages the employee's taxes are figured on. The SIMRP reimbursement is not income, because it pays them back for medical care under Section 213(d). Both of those are handled in payroll as they happen. At tax time, the employee has nothing new to file and nothing to set aside.
The employer's side
The employer's share of FICA is lower on every payroll, so the saving arrives during the year, not as a year end adjustment. The plan documents exist, and your CPA can read them. We loop your CPA in early on purpose. The page for CPAs walks through how it shows up on payroll.
The surprise other plans create
Some plans run a fixed indemnity premium through the plan before taxes. That turns the claim payment into income the employee has to report, and most of them are never told until tax time. That is the design to avoid, and it is explained on the indemnity page.
Frequently asked questions
Does the employee owe tax on the reimbursement?
No. The SIMRP reimbursement pays for medical care under Section 213(d), and Section 105(b) excludes it from the employee's income.
Does anything change on the employee's W-2?
The pre-tax election lowers the wages their taxes are figured on, and that is reflected in payroll during the year. There is nothing new for the employee to file.
Is there a year end adjustment for the employer?
No. The employer's FICA is lower on every payroll during the year. The saving arrives as it happens.
Will my CPA understand it?
Yes. The plan documents are written and reviewed by CPAs and ERISA attorneys, and we expect your CPA to review them. We work alongside your CPA, not around them.
Why do other plans cause surprises at tax time?
Usually because an indemnity premium was run through the plan before taxes, which makes the claim payment taxable to the employee. ProfitGuard Plus does not do that.
This is education, not tax or legal advice. Actual savings vary by payroll structure, participation, and state and local tax. Talk to your CPA about your specifics before you decide. ProfitGuard Plus is a marketing name for a structure built on IRS code sections 125, 106(a), 105, and 213(d).
See your ProfitGuard Plus number
Enter your W-2 headcount and see the combined value first. Then we'll run your exact numbers. You can also read the full walkthrough on the ProfitGuard Plus page or call +1 (586) 899-1003.
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