What do you need to know about a section 125 cafeteria plan?

The Cafeteria Plan offer employees significant tax and money-saving advantages. 

A Section 125 plan is called a cafeteria plan. This plan allows employees to choose to withhold pre-tax salary to cover the cost of specific benefits, or to choose between taxable and non-taxable. These benefits can include health insurance, child care, adoption assistance, life insurance and health savings accounts.


What are the requirements for a Section 125 cafeteria plan?

Section 125 Cafeteria Plan Requirements. To qualify as a Cafeteria Plan, the plan must include: At least one taxable benefit option (considered part of the employee’s salary), and. At least one qualified pre-tax benefit.


What expenses are allowed in a section 125 cafeteria plan?

A wide variety of medical and child care expenses is eligible for reimbursement under a section 125 cafeteria plan. As for medical items and treatments, there are dozens of eligible expenses that can be reimbursed. The following are eligible expenses: acupuncture, alcoholism treatment, ambulance services, ...


What does Section 125 on W2 mean?

SEC 125 is your employer's benefit plan. It is also known as a "cafeteria plan". Usually, what is reported there is your medical insurance premiums that are paid with pre-tax income. They are not taxed and are not included in your W-2 Box 1 wages so you cannot deduct them as medical expenses. SEC 125 is your employer's benefit plan.


What is a Section 125 benefit plan?

Here are the qualifying benefits you can include in your section 125 cafeteria plan document:

  • Accident and health benefits (not including Archer medical savings accounts)
  • Adoption assistance
  • Dependent care assistance
  • Group-term life insurance coverage
  • Health savings accounts (HSAs)


What is premium only 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.