27 Mar What Is a Section 125 Plan? Benefits, Tax Savings, and FAQs
Section 125 Plan, also known as a Cafeteria Plan
A Section 125 Plan, also known as a Cafeteria Plan, is an IRS-approved benefit that lets employees pay for health insurance, FSAs, HSAs, and dependent care with pre-tax dollars. (What Is a Section 125 Plan | Benefits | Tax Savings and FAQs)
What Is a Section 125 Plan?
A Section 125 Plan—also called a Cafeteria Plan—allows employees to pay for healthcare benefits with pre-tax dollars. This lowers taxable income, reducing the amount employees and employers owe in taxes.
✅ Tax savings for both employees & businesses
✅ Lower healthcare costs through pre-tax deductions
✅ Flexible benefit options to meet diverse employee needs
🔗 Learn more about how Section 125 Plans save employees and businesses money
How Does a Section 125 Plan Save You Money?
✅ Employees: Reduce taxable income and save 20-40% on healthcare costs.
✅ Employers: Cut payroll taxes by 7.65% per employee—without extra expenses.
✅ Businesses: Attract and retain talent without raising salaries.
Who Can Benefit from a Section 125 Plan?
✔ Small businesses looking to offer tax-free benefits
✔ Employees wanting to lower healthcare expenses
✔ Employers aiming to save on payroll taxes
Frequently Asked Questions (FAQs)
1️⃣ Do Section 125 Plans apply to all businesses?
Yes! Companies of any size can offer these plans, as long as they meet IRS guidelines.
2️⃣ What expenses qualify for pre-tax deductions?
Eligible expenses include health insurance, dental/vision coverage, FSAs, HSAs, and dependent care costs.
3️⃣ How do I set up a Section 125 Plan?
Contact The Policy Shop, and we’ll guide you through the process step by step!