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A Section 125 plan, often called a cafeteria plan, lets employees choose among certain benefits and may allow eligible benefit premiums or contributions to be paid with pre-tax dollars.
A Section 125 plan, often called a cafeteria plan, lets employees choose among certain benefits and may allow eligible benefit premiums or contributions to be paid with pre-tax dollars.
Employers use Section 125 plans to offer tax-advantaged benefit choices such as certain health plan premiums, health flexible spending accounts, or dependent care assistance. The plan must be documented and administered according to federal tax rules, including election and nondiscrimination requirements. Because pre-tax treatment affects payroll taxes and taxable wages, benefit elections need to flow accurately into payroll.