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.

cafeteria plan,

n an employee benefits plan in which employees select their medical insurance coverage and other nontaxable fringe benefits from a list of options provided by the employer.
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References in periodicals archive ?
A plan offering only a choice between taxable benefits is not a Section 125 plan.
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.
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).
The fees for the administration of this group's Section 125 Plan are about $2,000 per year.
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
In addition to standard FSAs, the Internal Revenue Service also allows a simple form of a section 125 plan known as a "premium-only plan," which employees use only to pay for health insurance premiums.
In 2002, South Carolina insurance regulators said employers there can offer list-billing without complying with small group health plan roles if they do not pay any portion of the premiums, do not reimburse employees for any portion of the premiums, and do not let workers use cash from a Section 125 plan or other tax-advantaged plan to pay the premiums.
Association and staff alike can benefit from a Section 125 plan.
In addition to the employee savings in federal (and possibly state and local) income taxes, both employees and employers avoid Social Security taxes on amounts deferred to a Section 125 plan.