Section 125 Health Benefits in Massachusetts: What Employees Should Know

• Employee-paid health premiums through a cafeteria plan are exempt from income tax withholding, Social Security tax and Medicare tax (IRS Publication 15-B, 2026).
• The employee share of FICA is 7.65%, made up of 6.2% Social Security and 1.45% Medicare, and the Social Security wage base is $184,500 in 2026 (IRS Publication 15, 2026).
• Massachusetts taxes wages at 5.00% for 2026, plus a 4% surtax on income above $1,107,750 (Massachusetts Department of Revenue, 2026).
• A record 403,624 people enrolled in a Massachusetts marketplace plan in 2026, and the state approved an average 10.4% increase for 2027 (healthinsurance.org, July 2026).
• Massachusetts open enrollment for 2027 runs October 23, 2026 through January 23, 2027 (Boston Globe, September 2026).

If you work in Massachusetts and see a Section 125 line on your pay stub, the short answer is that it is probably your health premium, taken out before most taxes. Massachusetts adds a flat state tax on top of the federal picture. This guide shows what you save, when you can change it, and what to ask HR if a deduction surprised you.

Reviewed by a licensed benefits professional. Last reviewed: October 25, 2026.

What are Section 125 health benefits in Massachusetts?

Section 125 health benefits in Massachusetts are health, dental or vision premiums that your employer lets you pay with pay that has not been taxed yet. The federal rule is the same in every state.

A Section 125 plan, also called a cafeteria plan, is a written employer plan that lets employees choose between cash pay and certain benefits. A cafeteria plan can offer accident and health coverage, dependent care assistance, group-term life insurance and an HSA (IRS Publication 15-B, 2026). Employee-paid accident and health benefits are exempt from income tax withholding, Social Security tax and Medicare tax (IRS Publication 15-B, 2026). Benecor's Section 125 pre-tax guide→ covers the federal rules in more detail.

Does Massachusetts tax Section 125 health contributions?

Massachusetts has a flat income tax on wages, and whether your premium also lowers your state withholding depends on how your employer's payroll is set up. Ask payroll before you count on that part of the savings.

The rate for tax year 2026 is 5.00% on wages. An additional 4% surtax applies only to income above $1,107,750 (Massachusetts Department of Revenue, 2026), so it does not touch most employees. An older Massachusetts letter ruling, LR 83-82 from 1983, says cafeteria plan benefits are subject to Massachusetts income tax to the extent they are subject to federal income tax. Health benefits excluded from federal income are therefore generally excluded in Massachusetts too, but that ruling is old and does not name health premiums directly, so get payroll's answer in writing.

How much does a Section 125 plan save a Massachusetts employee?

A Section 125 plan saves a Massachusetts employee at least 19.65 cents on each pre-tax premium dollar at a 12% federal bracket. That is 7.65% FICA plus 12% federal income tax. State savings come on top if your payroll applies them.

FICA is the payroll tax that funds Social Security and Medicare. The employee share is 7.65% (IRS Publication 15, 2026). The federal bracket in the table is an example. Your own bracket may differ.

Your real number depends on your bracket and how payroll applies state withholding. Higher earners above the Social Security wage base of $184,500 stop paying the 6.2% part for the rest of the year (IRS Publication 15, 2026).

How do I read the Section 125 line on my Massachusetts pay stub?

The Section 125 line on your Massachusetts pay stub shows the total of your pre-tax benefit deductions for that pay period. Common labels include Sec 125, Cafe 125, S125 and Pre-tax medical.

Check these three things on your stub:

1. The amount per pay period. Multiply by the number of pay periods to see your yearly total.
2. The benefits inside it. Medical, dental and vision are often bundled into one line.
3. Your W-2. Box 1 should show wages after pre-tax deductions, and Box 14 may show a Section 125 or cafeteria plan label. Compare Box 1 with your Social Security and Medicare wage boxes.

Benecor's W-2 Box 14 guide→ explains the labels employers use.

Can I change my Section 125 election mid-year in Massachusetts?

You can usually change your Section 125 election mid-year only after a qualifying life event that your plan allows. Federal rules lock elections for the plan year unless an event such as marriage, birth, divorce or a loss of other coverage occurs (26 CFR 1.125-4, 2026).

Your employer's plan document decides which events count and how long you have to ask. Many plans give 30 days. Ask HR for the plan document and the exact deadline before you assume you can change anything. Benecor's qualifying life events guide→ lists the common ones.

Does Massachusetts require employers to offer a Section 125 plan?

Massachusetts once required employers with 11 or more full-time-equivalent employees to maintain a Section 125 plan so part-time workers could buy health insurance pre-tax. A 2013 summary from Ogletree Deakins said that requirement still stood after the state repealed the Fair Share Contribution and the HIRD form.

That source is more than a decade old, and rules change. If you are a part-time worker who cannot join your employer's group plan, ask HR whether your company offers a pre-tax way to pay for other coverage.

What if I decline my employer's plan in Massachusetts?

If you decline your employer's health plan in Massachusetts, you need other coverage, and the marketplace is the Massachusetts Health Connector. A record 403,624 people enrolled in a Massachusetts marketplace plan in 2026 (healthinsurance.org, July 2026).

Those rate changes are before subsidies, and your own plan price can differ. Some members will be moved: Fallon Health is narrowing to central Massachusetts and Tufts Direct is leaving Berkshire County (Boston Globe, September 2026). Premiums paid through Section 125 come out before federal income tax and FICA (IRS Publication 15-B, 2026), which lowers what employer coverage costs you. Compare that with a Health Connector quote before you decline.

How do I ask HR about my Section 125 plan?

Send HR a short written request and keep the reply. Copy this email and fill in the brackets.

Benecor's Section 125 cafeteria plan guide→ explains how the plan works, and the Massachusetts Section 125 plan page→ covers the employer side. If you want a Benecor benefits expert to look at your situation, contact Benecor Health→.

Sources: IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits (2026); IRS Publication 15, Employer's Tax Guide (2026); Massachusetts Department of Revenue, Massachusetts tax rates (2026); Massachusetts Department of Revenue, Letter Ruling 83-82, Cafeteria Plan (1983); healthinsurance.org, Massachusetts state health insurance exchange (July 27, 2026); Boston Globe, Massachusetts Health Connector premiums, subsidies and open enrollment (September 14, 2026); Ogletree Deakins, MA Fair Share Contribution and HIRD repealed in FY2014 budget (August 30, 2013); 26 CFR 1.125-4, Permitted election changes (2026).