Section 125 Plan Information
most complete list of IRS Section 125 Plan information
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This is the portion of the IRS
Code that defines Section 125 employee benefits
that allow employees to pre-tax or avoid paying
taxes on insurance premium, medical expense, and
day care expenses for children or adults. Section
125 plans require a formal plan document and summary
plan description before deductions can be made
pre-tax. Many employers take IRS Section 125 deductions
without the knowledge that a formal plan document
and summary plan description are required by the
IRS and DOL. See the drop-down menus above for
more information about IRS Section 125 components.
Or call and speak to a Section 125 expert toll-free
Section 125 Plan is the formal
"Plan" established by an employer for
the benefit of their employees. The word "Plan"
refers to the Plan Document that allows the benefit
in makes it compliant with IRS and Department
of Labor law. Without the Section 125 Plan the
benefits will be disallowed by the IRS and/or
This is the portion of the tax
code that allows IRS Section 125 pre-tax deductions
to be made for insurance premium (POP), medical
expenses (MERP or FSA), and dependent child care
expenses (Dependent Care FSA). IRS Section 125
is the part of the code allows most all of the
flex benefits listed in the drop-down menus at
the top of the page.
Section 125 Plan
The IRS Section 125 Plan is the
formal plan established by an employer to allow
their employees to take IRS Section 125 Plan tax
deductible benefits such as insurance premium
(Premium Only Plan), medical expense (Health or
Medical FSA), and dependent care expenses (Dependent
FSA). IRS requires a Plan Document be in place
to take these deductions.
125 Premium Only Plan
Section 125 Premium Only Plan or sometimes called
POP plans allow employees to pre-tax or avoid
paying state and federal taxes on their portion
of insurance premium. Premium Only Plan arrangements
are especially valuable to employers as health
insurance continues to increase out-of-control.
Employees can also use the Section 125 Premium
Only Plan to pre-tax supplemental insurance such
as dental, vision, accident, term life to $50,000,
cancer policies, and many other ancillary benefits.
Premium Only Plans allow employees to save approximately
30% in taxes while employers generally save 8%
to 10% in matching taxes.
An FSA Section 125 is the term
used to describe Section 125 Flexible Benefit
Plans or FSA Plans. An FSA could be a medical
expenses plan designed to reimburse out-of-pocket
medical expenses, sometimes called a Medical FSA
or a Health FSA. The term FSA Section 125 is sometimes
used to describe a dependent care FSA Section
125 used to reimburse dependent care expenses
using employee pre-tax contributions. For more
information on dependent care FSA plans see this
Care Assistance Plans.
A POP Section 125
Plan is another term used for the Premium Only
Plan. POP Section 125 plans do essentially the
same thing, they allow employees to pretax insurance
premium and supplemental insurance under IRS or
Internal Revenue Service Code.
125 Cafeteria Plan
Section 125 Cafeteria
Plan is the term used to explain the combination
of the Premium Only Plan or POP, the FSA for medical
expenses, and the FSA for Dependent Care expenses.
All three components make up the Section 125 Cafeteria
Plan. The term Section 125 Cafeteria Plan is more
appropriate when the employer is allocating a
certain budget for each employee. The employee
can then spend this budget on insurance products,
reimbursement of out-of-pocket medical expenses
or dependent care expenses much the same way they
would pick food items from a cafeteria setting.
Revenue Code Section 125
Internal Revenue Code Section 125 is the portion
of the IRS Code that allows Section 125 Premium
Only Plans, FSA Section 125 Plans for medical
and dependent care expenses. See a copy of the
Code Section 125 here.
Code Section 125
IRS Code Section 125 is another
term used to describe the portion of the Internal
Revenue Code that allows the Premium Only Plan
or POP, and the FSA part that allows for medical
expenses to be reimbursed as well as dependent
care expenses. IRS Code Section 125 requires employers
to establish a formal plan document before using
this portion of the IRS code to pre-tax benefits.
125 Flexible Spending Account
A Section 125 Flexible Spending
Account is a special account used by an employer
to allow his employees to pre-tax medical expenses
and dependent care expenses. Flexible Spending
Accounts are normally employee funded using pre-tax
dollars. Employees then accumulate expenses and
turn them into either the employer or plan administrator
to be reimbursed through the Flexible Spending