Section 125 Benefit Plans

The plan is called a cafeteria plan because it includes a menu of benefits for employees to choose from.

Section 125 benefit plans. A section 125 plan is part of the irs code that enables and allows employees to take taxable benefits such as a cash salary and convert them into nontaxable benefits. Like an fsa hsas enable people to set. A plan offering only a choice between taxable benefits is not a section 125 plan.

Flexible spending account an fsa allows an employee to pay for certain medical expenses on a pretax basis. An fsa allows employees to pay for qualified out of pocket medical expenses on a. Archer msas athletic facilities de minimis minimal benefits educational assistance employee discounts employer provided cell phones lodging on your business premises meals moving expense reimbursements no additional cost.

A written plan document is mandatory and should be amended or restated from time to time to remain current. Health savings accounts hsas. Section 125 of the internal revenue code refers to cafeteria plan benefits.

Flexible spending accounts fsas. Employers do not need a section 125 plan document in place in order for employees to pay for qualified benefits for example health dental vision premiums pretax. Section 125 plans from paychex can save money for your company and employees a section 125 premium only plan pop and flexible spending account fsa also known as cafeteria plans can reduce fica federal and state and local taxes for your company and employees when combined with your company s group health insurance.

Consider some of the benefits of section 125 plans. Pretax health insurance premium deductions pop plans allow employees to decide to set aside a portion of their pretax. Since funds are placed into this account pre tax it reduces the amount of taxable income present.

These are the benefits you cannot include in your irs section 125 plan. Pretax benefits typically included in a section 125 cafeteria plan 1. The following section 125 cafeteria plan features offer employees significant tax and money saving advantages.