Pre-Tax vs. After-Tax Deductions

Pre-Tax vs. After-Tax

Eligible employees may elect to have certain benefit expenses deducted from their paycheck on a pre or after-tax basis in accordance with IRS regulations.  Pre-tax elections are irrevocable within the plan year for which they are made unless you have a qualifying event.  You may select pre-tax or after-tax deductions when you are enrolling in your benefits as a new hire, during the annual open enrollment event, or if you have a qualifying life change.  

Pre-tax

With a pre-tax election, benefit premiums are deducted from your gross pay before Medicare, Federal, and State taxes therefore reducing your tax liability (you pay less in taxes and get more in your paycheck).  Pre-tax elections could increase your net wages.  Amounts deducted on a pre-tax basis are not considered "inclusive salary" for reporting purposes to PERA and may impact your highest average salary calculation.  Pre-tax deductions reduce your salary reported to PERA.  Please contact PERA directly to find out how this may affect you.  

After-tax

With an after-tax election, benefit premiums are deducted from your pay after Medicare, Federal, and State taxes therefore does not reduce your taxable gross salary.  After-tax elections will result in a higher tax liability and higher HAS (highest average salary).  

*Please note, the Benefits Office does not provide tax advice.  Any questions about your individual circumstances should be directed to a tax advisor.