Products > Group > Section 125

Section 125 Plans are named for the portion of the IRS Code allowing employers to establish a plan that allows employees to pre-tax or avoid paying state and federal taxes on deductions for employee benefits such as health insurance premiums (Premium Only Plans or POP), un-reimbursed medical expenses (Medical FSA), and day care expenses for children or adults (Dependent Care FSA). Employees can also pre-tax supplemental insurance such as dental, vision, accident, and cancer policies. Medical Flexible Spending Accounts are designed to reimburse out-of-pocket medical expenses. A Dependent Care Flexible Spending Account is used to reimburse dependent care expenses. Employees accumulate qualified expenses and submit them to either the employer or plan administrator to be reimbursed through the Flexible Spending Account.

Section 125 Plans require and employer to maintain a formal, written plan document and Summary Plan Description before deductions can be made pre-tax. The Plan Document that allows the benefit makes it compliant with IRS and Department of Labor law.

Section 125 Plans are a great way for employers to offset the rising cost of employee health care by reducing payroll taxes. Section 125 Plans allow employees to save approximately 30% in taxes while employers generally save 8% to 10% in matching FICA / FUTA / SUTA taxes.

Section 125 Cafeteria Plans may include the following benefits:

  • Medical
  • Dental
  • Disability
  • Term Life
  • Vision
  • Accident
  • Cancer
  • Hospital Confinement
  • Specified Disease
  • Flexible Spending Accounts (FSA)

Tolbert & Associates has extensive experience with establishing Section 125 Plans. Please contact us for more information.