Payroll Deduction Plan

DEFINITION of 'Payroll Deduction Plan'

A contribution plan in which an employer deducts a specified amount from an employee's pay and puts the funds toward insurance, healthcare or an investment account. In most situations, employees enter into payroll deduction plans on a voluntary basis.

BREAKING DOWN 'Payroll Deduction Plan'

Payroll deduction plans offer employees a convenient way to automatically contribute income toward an ongoing expense or investment. For example, it is common for employees to deduct a set percentage of income and contribute it to their Traditional or Roth IRAs. An employee may also choose to have the premiums from an insurance policy deducted from their pay, ensuring that a payment is never missed.

RELATED TERMS
  1. Deductible

    1. The amount you have to pay out-of-pocket for expenses before ...
  2. Employee Contribution Plan

    A company-sponsored retirement plan where employees may elect ...
  3. Above The Line Deduction

    Above the line deductions are certain types of deductions that ...
  4. Interest Deduction

    A deduction for taxpayers who pay certain types of interest. ...
  5. Tax-Sheltered Annuity

    A type of annuity that allows an employee to make contributions ...
  6. Schedule A

    Schedule A is a U.S. income tax form that is used by taxpayers ...
Related Articles
  1. Personal Finance

    What's a Deductible?

    With insurance, a deductible is the amount of money the insured pays out-of-pocket before the insurance company pays for the loss.
  2. Financial Advisor

    Don't Miss These Tax Deductions

    Knowing the tax deductions you're entitled to can make or break your bank account. Do you know about all these insurance-related deductions?
  3. Financial Advisor

    Life Insurance Plans to Help Your Small Business Retain Employees

    How to use and design cash value life insurance plans as an incentive to help attract and retain key employees.
  4. Personal Finance

    Don't Overpay for Health Insurance This Year

    Health insurance open enrollment starts Nov. 1. Choosing the right ACA plan (or plan at work) takes figuring out how often you actually go to the doctor.
  5. Financial Advisor

    Top Tax Tips to Deduct Investment Management Fees

    Investment expenses can be deducted by those who meet three main criteria. Here's what they are and how they work.
  6. Retirement

    What's a Defined Contribution Plan?

    A defined contribution plan is a company retirement plan that specifies the amount of money contributed to it.
  7. Retirement

    Plans The Small-Business Owner Can Establish

    Don't hesitate to adopt a smart plan for you and your employees.
  8. Personal Finance

    Tips for Reducing Health Insurance Expenses

    For many self-employed people, health insurance premiums can make up a hefty percentage of their budget. Here are some tips on how to deduct them.
  9. Financial Advisor

    How to Deduct Medical Insurance Premiums

    An overview of tax breaks for those who pay medical insurance premiums.
  10. Personal Finance

    Some US Households Are Still Seeing High Healthcare Costs

    Even though healthcare premiums have remained steady under the Affordable Care Act, many families are still feeling squeezed by healthcare costs.
RELATED FAQS
  1. After separating from prior employers in the first quarter of 2015, are we able to ...

    My wife and I separated from our prior employers in the first quarter of 2015. We were covered under t... Read Answer >>
  2. Can I deduct IRA contributions from a 3-hour weekly part time job?

    I am self employed without a retirement plan. However I have a part time job (3 hours per week) that has a 401A retirement ... Read Answer >>
  3. What is the maximum tax deductible contribution I could make to an IRA if I contributed ...

    I file married jointly. My husband made no contributions.  ... Read Answer >>
  4. How is the deductible I paid for my insurance claim treated for tax purposes?

    Find out how your health insurance deductible is treated for tax purposes and under what conditions you may be able to deduct ... Read Answer >>
  5. What is the range of deductibles offered with various health insurance plans?

    Explore the wide range of deductibles available on various health insurance plans, and learn factors to consider when selecting ... Read Answer >>
Hot Definitions
  1. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  2. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  3. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  4. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  5. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  6. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
Trading Center