Cafeteria Plans (Section 125 Plans)

Free Money? Cafeteria Plans may be the next best thing.

Cafeteria plans, also known as section 125 plans (after the section of the Internal Revenue Code that established them), are a great way to boost your employee benefits package, while saving you money at the same time. A cafeteria plan allows employees to withhold a portion of their pre-tax salary to pay for their health insurance premiums, as well as certain medical and child care expenses.

Through cafeteria plans, employees are able to both reduce their tax burden and use pre-tax income to recoup some of their out-of-pocket medical and dependent care expenses. Employers are also benefited, as pre-tax dollars committed to a section 125 plan are not subject to payroll taxes, like FICA and FUTA. Also, cafeteria plans cost very little to set up and administer. In fact, for many employers, the cost of implementing a cafeteria plan is recovered through the tax savings realized in the first year.

As an employer, there are three (3) main benefits you can offer your employees through a cafeteria plan.

Contact us to find out how you can pump up your employee benefits package and start saving money today

© 2014 Mark W. Klein, LUTCF. Designed by Kleanhouse Solutions. All rights reserved.