MED125, H125, S125 on Your Paycheck: Every Pay Stub Code Explained

MED 125 on your paycheck, along with H125, S125 and CAF125, means a benefit cost came out of your pay before taxes. Payroll systems like ADP, Paychex, Paylocity, Gusto and Paycom each use their own short labels, which is why the codes look so cryptic. This guide decodes every common pre-tax code, shows how much a 125 deduction saves, and explains what to do if you see one you never chose.

This page is general information, not tax or legal advice. Rules depend on your employer's plan and your state.

What do the 125 codes on my pay stub mean?

Every pay stub code ending in 125 is a pre-tax deduction under a Section 125 cafeteria plan. A Section 125 cafeteria plan is a written employer plan that lets employees pay for certain benefits with pre-tax pay. The letters in front of 125 tell you what the money pays for. For the basics of how these plans work, see the Section 125 cafeteria plan guide.

Find your code in the left column. Payroll systems use slightly different labels, so look for the closest match.

Rule of thumb: 125 means the deduction lowers your taxes. EE means you pay it. ER means your employer pays it. Imputed means taxable value added to your pay, not cash.

What is MED 125 on my paycheck?

MED 125 is the pre-tax amount you pay toward medical coverage through your employer's Section 125 plan. Some employers use the MED 125 label for a medical FSA contribution instead of premiums. If you have both a medical premium and an FSA, you may see two separate lines.

Check your benefits confirmation or enrollment portal. The MED 125 amount should match the per-paycheck cost of the medical plan or FSA you picked.

What is H125 on my paycheck?

H125 means Health 125. The H125 line is your share of health insurance premiums, taken out before taxes. Some payroll systems show the same deduction as HLTH 125 or MED 125.

If your H125 amount changed this year, the usual reasons are a new plan year price, a new plan, or adding or dropping a family member.

What is S125 or SEC 125 on my paycheck?

S125 and SEC 125 are umbrella labels for money moved pre-tax through your employer's cafeteria plan. One S125 line can hold medical, dental, vision and FSA money combined. Your year-to-date S125 total often shows up later as a note in Box 14 of your W-2.

What is CAF 125 or CAFE 125 on my paycheck?

CAF 125 and CAFE 125 mean the same thing as S125. Cafe stands for cafeteria plan, because employees pick benefits from a menu, like a cafeteria line. The Cafe 125 deduction guide covers that one label in more depth.

What is ACA125 on my paycheck?

ACA125 is a pre-tax deduction for a health coverage or health program your employer offers through its Section 125 plan. The 125 means the deduction is taken before taxes. The ACA letters are part of the plan label your employer's payroll system uses.

Check your enrollment confirmation or ask HR which plan the ACA125 line pays for. If an earnings line such as UNIFY WELL RWD appears on the same stub, ask HR how the two lines work together.

What is UNIFY WELL RWD on my paycheck?

UNIFY WELL RWD is a reward or payment line from the UnifyWell wellness program. RWD is short for reward. The UNIFY WELL RWD line is earnings, not a deduction, and it often appears next to a matching pre-tax deduction.

The UnifyWell team can best answer questions about the UNIFY WELL RWD line, so contact them first. Each employer sets up its program and compliance process in its own way, so the tax treatment can differ from one company to the next. Ask the UnifyWell team to confirm that the way your pay stub shows the reward is correct for your plan.

If you would rather have someone look into it for you, Summit Health Benefits can review your pay stub and find the answer for a one-time $200 fee. Contact Summit Health Benefits to request a review.

What is POP EE pretax on my paycheck?

POP EE pretax is your share of insurance premiums, paid before taxes through a Premium Only Plan. A Premium Only Plan (POP) is the simplest type of Section 125 plan. A POP only lets employees pay premiums pre-tax, with no FSA. EE means employee.

Is Med EE the same as MED 125?

No. Med EE is the federal Medicare tax, and MED 125 is a benefit you chose. This is the most common mix-up on a pay stub.

• Med EE is the federal Medicare tax. The IRS sets the employee Medicare rate at 1.45% of Medicare wages (IRS Tax Topic 751). Everyone with wages pays it.
• MED 125 is a pre-tax payment for a benefit you elected.

The two lines are connected in one way. A MED 125 deduction lowers the wages that the Med EE tax is figured on. That is why the Med EE line is often a little less than 1.45% of gross pay.

What are GTL and DP imputed on my pay stub?

GTL and DP imputed are not deductions. They add taxable value to your pay without adding cash.

• GTL is imputed income for group term life insurance. IRS Publication 15-B says the cost of employer-paid coverage above $50,000 counts as taxable income to the employee.
• DP imputed or DPINS is usually the value of health coverage for a domestic partner who is not your tax dependent. That value is taxable.

How much does a 125 deduction save on each paycheck?

A 125 deduction saves you the income tax and FICA you would have paid on that money. FICA is the combined Social Security and Medicare tax, which the IRS sets at 7.65% for employees (6.2% Social Security plus 1.45% Medicare, IRS Tax Topic 751). Here is a simple example. Your numbers will differ by income, tax bracket and state.

Setup: Paid every two weeks. Gross pay $3,000. H125 deduction $150 per paycheck. 12% federal tax bracket. 5% state income tax.

In this example, paying through H125 puts about $37 back in each paycheck, or about $961 a year over 26 paychecks. The coverage is the same. Only the tax bill is smaller. The employer saves 7.65% FICA on the same $150, which the FICA tax savings guide walks through.

How do 125 deductions show up on my W-2?

Section 125 deductions show up on your W-2 as lower taxable wages, not as a separate tax. According to the IRS General Instructions for Forms W-2 and W-3, Box 1 shows federal wages after pre-tax deductions, and Boxes 3 and 5 (Social Security and Medicare wages) are usually lower too. A 401(k) lowers Box 1 but not Boxes 3 and 5, which is how you can tell the two apart.

A Box 14 note such as "Less Sec 125" or "Cafe 125" tells you that amount was subtracted before Box 1 was figured. The note is for your records. You do not deduct it again on your tax return, and you cannot also claim those same premiums as a medical expense deduction. The W-2 Box 14 codes guide lists every Box 14 label and the Box 12 codes W and DD.

Which states tax Section 125 deductions differently?

Most states follow the federal rules for Section 125 deductions. New Jersey, Pennsylvania and California are the main exceptions.

• New Jersey: The New Jersey Division of Taxation treats most Section 125 salary reductions as taxable state wages. New Jersey wages in Box 16 can be higher than Box 1. That is normal, not an error.
• Pennsylvania: The Pennsylvania Department of Revenue exempts medical, disability and life premiums paid through a qualifying plan, but taxes dependent care FSA money at the state level.
• California and New Jersey: Both states tax HSA contributions for state income tax purposes, even though the contributions are pre-tax federally, according to a 2025 Newfront summary of state HSA rules.

If your state wages look higher than your federal wages, a 125 deduction is the first thing to check.

What if I never signed up for a 125 deduction?

If a 125 deduction appears that you never chose, start with your enrollment records and then ask HR or payroll in writing. Most surprise 125 lines turn out to be elections that carried over or a program your employer added. Work through these steps in order:

1. Check your enrollment confirmation. Open enrollment elections sometimes carry over automatically to the new plan year.
2. Look for an offsetting line. Some employer programs show a pre-tax deduction and a matching earnings, "claim" or reward line (such as UNIFY WELL RWD) on the same stub. If both appear, ask HR how the program works and what you receive.
3. Ask HR or payroll in writing. Request the plan name, what the deduction pays for, when you were enrolled and how to change it. Keep the reply.
4. Ask about the change rules. Treasury Regulation 1.125-4 generally locks Section 125 elections for the plan year. Mid-year changes are allowed only for specific events, such as marriage, a birth or losing other coverage. The qualifying life event guide lists those events. Some plans enroll employees automatically, but the plan must give notice and a way to opt out.
5. Compare your W-2 to your pay stubs. If a W-2 shows 125 money that never came out of any paycheck, ask your employer to review it. The payroll records and the W-2 should match.

Programs that run wellness payments through a cafeteria plan carry their own tax questions. The Section 125 wellness plan compliance guide explains what the IRS has said about them.

How do I read my pay stub in two minutes?

Sort every line on your pay stub into one of four groups: pre-tax benefits, taxes, employer-paid amounts and imputed income. This checklist does it in order:

1. Find every line with 125, POP, FSA or HSA. Those lines are your pre-tax benefits.
2. Match each pre-tax amount to your benefits portal.
3. Find Med EE and SS EE or OASDI. Those lines are taxes, not benefits.
4. Find any ER lines. Your employer pays those amounts. They are not taken from you.
5. Find GTL or imputed lines. Those lines add taxable value, not cash.
6. Compare this stub to last month's. Any new or changed line deserves one question to HR.

Who sets up Section 125 payroll codes for employers?

A Section 125 plan administrator sets up the plan document and works with payroll so each pre-tax deduction is coded correctly. Summit Health Benefits is a Section 125 plan administrator for small and mid-size employers. Clear payroll labels also cut the "what is this deduction?" questions HR gets every January.

When employees pay premiums after tax, the employer pays 7.65% FICA on every dollar of those premiums. Summit Health Benefits sets up and runs Section 125 plans for $35 per enrolled employee per month (PEPM). The fee is paid out of the employer FICA savings the plan creates, so employers typically still net about $56 to $101 per enrolled employee per month. Employees usually take home about $70 to $110 more per month.

The step-by-step Section 125 setup guide shows what the process involves, and the savings calculator estimates your numbers.

Frequently Asked Questions

Sources

• Internal Revenue Code Section 125 and Treasury Regulation 1.125-4 (election changes)
• IRS Tax Topic 751, Social Security and Medicare Withholding Rates (2026)
• IRS General Instructions for Forms W-2 and W-3 (Box 1, 3, 5, 10, 12 codes DD and W, Box 14)
• IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits (cafeteria plans, group term life over $50,000)
• New Jersey Division of Taxation, Technical Bulletin TB-39 and TAM 2011-14 (cafeteria plan wages)
• Pennsylvania Department of Revenue, Policy Statement on Section 125 plans (1997)
• Newfront, California and New Jersey HSA state income tax (2025)