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A Section 125 plan Health Flexible Spending Account (FSA) allows employees to use up to $2,850 (2022 plan year) and $3,050 (2023 plan year) in pre-tax dollars to pay for eligible out-of-pocket medical, dental and vision care expenses not covered by other insurance.
For instance, a section 125 plan or cafeteria plan allows employees to pay qualified medical, dental, vision, or dependent care expenses on a pre-tax basis, which can reduce their taxable income as well as their employers Social Security (FICA) liability, federal income, and unemployment taxes (FUTA), and state
U.S. employers of all types can sponsor a Section 125 plan and permit their employees to pay for qualified benefits on a pretax basis. However, if the employers organizational structure is such that the owners are considered to be self-employed individuals, then the owners cannot participate in the Section 125 plan.
A section 125 cafeteria plan helps employees save money on qualifying expenses such as medical or dependent care through pretax dollars. A premium only plan (POP) is a type of section 125 plan which specifically allows employees to pay for health insurance premiums with pretax dollars.
Here are four examples of cafeteria 125 healthcare benefits for employees: Premium-only plan (POP) With a POP plan, employees pay for their health insurance benefits with their pretax income. Health savings account (HSA) Flexible spending accounts (FSA) Dependent care assistance plan (DCAP)
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