Employer guide
Section 125 plan types and when to use them
A Section 125 cafeteria plan is a written plan that lets workers choose certain benefits instead of taxable pay. Start with the benefit you want to offer. The right setup depends on what employees need and what your team can run.
See what your business could saveMatch the plan to the job
| What you want to do | What to ask about | What to check |
|---|---|---|
| Let workers pay their share of a group health premium before tax | A premium-only plan | Which premiums can come out before tax? |
| Help workers pay for eligible health costs | A health flexible spending account (FSA) | Which costs count, and what happens to money left over? |
| Help workers pay for eligible care for a child or other dependent | A dependent care FSA | Who can use it, and what costs can it cover? |
| Meet certain fairness rules using a small-business option | A simple cafeteria plan | Does our business qualify, and how much must we put in? |
Start with one question
Say you already offer group health insurance. Your main goal is to let workers pay their share of the premium before tax. Ask about a premium-only plan first. A spending account is a benefit you can add under a cafeteria plan. Ask what adding one would take.
A simple cafeteria plan has special rules about who can join and how much the employer must put in. Ask your adviser to compare those rules with the plan you have in mind.
Get these answers in writing
- Who can join?
- What will come out of each check?
- Who will keep track of employee choices and run any required plan tests?
- What will the business pay to set up and run the plan?
Sources
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