Indiana counties do not tax pre-tax items, so I think the CPA (especially if she/she is an Indiana CPA) is correct.
Note that Kentucky localities, however, do tax such items. Is it possible that the payroll processer is confusing the rules in the two neighboring states?
Sorry, I do not have an exact citation, but got this from a coworker who is a credential tax professional who lives in Kentucky and does Indiana tax returns frequently.
Look at this Indiana link. Notice that the tax is levied on "wages". but it is normal that wages, as reported on the federal return and passed down to the state, do not contain these pre-tax amounts.
Also notice the telephone number at the bottom of the page, in case you want to follow up.
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