cafeteria plan

(redirected from Section 125 Plan)
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ca·fe·ter·i·a plan

(kafe-tē'ri-a plan)
Employee benefit plan that allows a choice between alternative nontaxable benefits.
Medical Dictionary for the Health Professions and Nursing © Farlex 2012
References in periodicals archive ?
1 A Section 125 plan is just one of several ways for employers to help employees with funding their HSAs.
Governments that already have a Section 125 plan in place and offer personal health care or dependent care spending accounts to employees need to make sure they are promoting the benefit and educating employees about how to take full advantage of this resource.
Under ERISA, Department of Labor rulings and court decisions have clarified that individual insurance purchased through a Section 125 plan constitutes nongroup coverage as long as the employer does not contribute to the premium and does not otherwise endorse or promote the insurance.
If available to an employee, a HSA may be funded up to the 2008 contribution limit of $2,900 for an individual and $5,800 for a family, with pre-tax salary reductions or with employer contributions that may be available through a Section 125 plan. Contributions are not subject to state or federal income tax or FICA withholding.
With a Section 125 plan in place, employees can buy their health insurance through payroll deduction with pre-tax dollars.
Thirty-three cents of the increase will be used to provide more needed childhood immunizations, the healthcare plan for low-income Hoosiers, smoking cessation programs, and help for small businesses to offer health insurance to their employees; 3 cents for increased Medicaid provider reimbursement rates, 5 cents for other health initiatives, and 3 cents for Section 125 plans (a plan that allows employers and employees to purchase health insurance on a pre-tax basis).
In addition to medical expenses, dependent care expenses can also be paid through a Section 125 Plan. Most families with young children easily reach the $5,000 maximum for dependent care.
Furthermore when an employee authorizes a tax-free wage reduction under a Section 125 plan, the company also saves its portion of the related payroll taxes: FICA, Medicare and unemployment.
The next tier of a Section 125 plan is called a flexible spending account.
The decision to adopt one type of Section 125 plan as opposed to another depends on the philosophy, needs, and employee benefits budget of the sponsoring corporation.
Section 125 Plan required for pre-tax payroll deferral