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Section 125 Cafeteria Plan

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Section 125 Cafeteria Plan

Group Benefits - Section 125 Cafeteria Plan

A Cafeteria Plan (includes Premium Only Plans and Flexible Spending Accounts) is an employee benefits program designed to take advantage of Section 125 of the Internal Revenue Code. A Cafeteria Plan allows employees to pay certain qualified expenses (such as health insurance premiums) on a pre-tax basis, thereby reducing their total taxable income and increasing their spendable/take-home income. Funds set aside in Flexible Spending Accounts (FSAs) are not subject to federal, state, or Social Security taxes. On average, employees save from $.25 to $.49 for EVERY dollar they contribute to the FSA

Qualified Benefits

 

A cafeteria plan, as defined in Section 125 of the Internal Revenue Code, is a plan in which all participants are employees who choose from a minimum of two or more benefits that consist of cash and qualified benefits. Those benefits include:

  • Accident and Health Plans
  • Dependent Care Assistance Programs
  • Group Term-Life Insurance
  • Short-Term or Long-Term Disability Coverage
  • Health Savings Accounts
  • Elective Contributions to a Section 401(k) Plan
  • Elective Vacation Days
  • Cash
  • Flexible Spending Accounts
  • Adoption Assistance

Items

Monthly Salary

Insurance (Pre-Tax)

Estimated TRS (6.4%)

Taxable Gross Income

Federal Taxes (20%)

Insurance (After Tax)

Take Home Pay

With Section 125

$3000.00

($700.00)

($192.00)

$2108.00

($421.60)

($75.00)

$1611.40

Without Section 125

$3000.00

N/A

($192.00)

$2808.00

($561.60)

($775.00)

$1471.40

This sample paycheck with Section 125 Cafeteria Plan has $140 of more spendable income per month! With that income, it has the potential annual savings of $1,680.

FAQ'S

What is Section 125 Cafeteria Plans?

A Cafeteria Plan (includes Premium Only Plans and Flexible Spending Accounts) is an employee benefits program designed to take advantage of Section 125 of the Internal Revenue Code. A Cafeteria Plan allows employees to pay certain qualified expenses (such as health insurance premiums, medical expenses and dependent care) on a pre-tax basis, thereby reducing their total taxable income and increasing their spendable/take-home income.

As an employer, why should I provide Section 125 Cafeteria Plans?

There are tax advantages for both the employees and employers when establishing a Cafeteria Plan. The employer can lower their payroll taxes, which in turn can lower their workers’ compensation premium.

How much would this cost the company?

N/A

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Section 125 Cafeteria Plan

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Consolidated Omnibus Budget Reconciliation Act (COBRA)

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  • About Us
  • Group Benefits
    • Group Medical
    • Group Dental
    • Group Vision
    • Short-Term Disability (STD)
    • Life Insurance / Accidental Death and Dismemberment (AD&D)
    • Long-Term Disability (LTD)
    • Long-Term Care (LTC)
    • Employee Assistance Program (EAP)
    • Travel Insurance
    • Pet Insurance
    • Section 125 Cafeteria Plan
    • Legal Services
    • Consolidated Omnibus Budget Reconciliation Act (COBRA)
    • Qualified Retirement Plan
  • Individual Insurance
    • Individual Health Insurance
    • Individual Dental Insurance
    • Individual Vision Insurance
    • Individual Life Insurance
      • Term Life Insurance
      • Universal Life Insurance
      • Whole Life Insurance
  • Commercial
    • General Liability
      • Pollution
      • Volunteer Coverage
    • Property
    • Professional Liability
    • Workers Compensation
    • Commercial Automobile
      • Garage Keepers
    • Commercial Umbrella
    • Crime
    • Management Liability
      • Directors & Officers Liability
      • Fiduciary Liability
      • Employment Practices Liability
      • ERISA Bond
    • Cyber Liability
    • Constrution Related Coverage
      • Inland Marine
      • Builders Risk
      • Bond
    • Travel Insurances
    • Sports / Travel Related Coverage
      • Amateur Sports / Health & Fitness
  • Auto . Home . Renters
    • Auto Insurance
    • Motorcycle Insurance
    • Homeowners’ Insurance
    • Dwelling Fire/Landlord
    • Renters
    • Condo Unit Owners
    • Builders Risk Insurance
    • Umbrella
    • Travel Insurance
    • Boat
    • Personal Articles Floater
    • Wedding/Special Event Coverage
  • Blog
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