What Is Section 125

Section 125 plans section 125 plans from paychex can save money for your company and employees.

What is section 125. Section 125 is a written plan that lets employees choose between qualifying benefits and cash. A section 125 plan is the only means by which an employer can offer employees a choice between taxable and nontaxable benefits without the choice causing the benefits to become taxable. A section 125 plan is part of the irs code that enables and allows employees to take taxable benefits such as a cash salary and convert them into nontaxable benefits.

A section 125 premium only plan pop and flexible spending account fsa also known as cafeteria plans can reduce fica federal and state and local taxes for your company and employees when combined with your company s group health insurance. If an employee makes the election before the start of the plan year and other 125 requirements are satisfied the employee s election of one or more qualified. A 125 cafeteria plan is a written plan that allows employees to elect between permitted taxable benefits such as cash and certain qualified benefits.

Employees their spouses and dependents can all benefit from section 125 plans. A section 125 cafeteria plan is an employer sponsored benefits plan that lets employees pay for certain qualified medical expenses such as health insurance premiums on a pre tax basis. Under a section 125 program you may choose to pay for qualified benefit premiums before any taxes are deducted from employee paychecks.

Employees receive benefits as pre tax deductions.