Are you sure the Section 125 contribution was not deducted from your wages? It should not be included in the wages in box 1, but you don't see the deduction on the W-2. The employer subtracts the Sec 125 amount when they calculate the amount to put in box 1. Ask your employer's payroll department to show you how they calculated the box 1 wages. I think you will find that they already deducted the Sec 125 amount.