Cafeteria Plan

(redirected from Section 125)
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Cafeteria Plan

1. An employee benefit in which an employee may contribute so much of his/her pretax income into a special account that may be used for a broad range of purposes. One may use the funds in a cafeteria plan for matters such as medical expenses, life insurance premiums, or other things. This allows the employee to structure his/her employee benefits in a way that best suits their needs for a given period of time. For example, a young, healthy employee may have the ability to choose a less expensive, less comprehensive insurance plan than he/she might otherwise receive from an employer. It is formally called a Section 125 plan. See also: Flexible Spending Account.

2. An employee benefit plan in which employees may choose from multiple options. For example, an employee may choose among a health insurance plan with no deductible, one with a $500 deductible, or one with a $1,000 deductible.

Cafeteria plan.

Some employers offer cafeteria plans, more formally known as flexible spending plans, which give you the option of participating in a range of tax-saving benefit programs.

If you enroll in the plan, you choose the percentage of your pretax income to be withheld from your paycheck, up to the limit the plan allows. You allocate your money to the parts of the plan you want to participate in.

For example, you can set aside money to pay for medical expenses that aren't covered by insurance, for child care, or for additional life insurance coverage. As you incur these kinds of expenses, you are reimbursed from the amount you have put into the plan.

Since you owe no income tax on the money you contribute, you actually have more cash available for these expenses than if you were spending after-tax dollars.

However, you must estimate the amount you're going to contribute before the tax year begins, and you forfeit any money you've set aside but don't spend. For example, if you've set aside $1,500 for medical expenses but spend only $1,400, you lose the $100.

In some plans the deadline for spending the money in your flexible spending account is December 31. Other plans provide up to a three-month extension.

Cafeteria Plan

A plan wherein an employer offers a choice of salary or specified nontaxable fringe benefits from which participating employees may select. The plan may be funded with employer contributions, employee contributions (usually through salary reduction agreements) or a combination of both. Also called a section 125 plan.
References in periodicals archive ?
Here are five things to know about HSAs and Section 125 plans.
There was no need to make any references to the religious beliefs and delve into the Quranic injunctions when the subject concerned a dispute under Section 125 of the CrPC.
An FIR has been registered against Patil under Sections 153-A of the Indian Penal Code (IPC) and Section 125 of People's Representation Act.
Section 125 of the Internal Revenue Code makes it possible for employers to offer their employees the option of paying for qualified insurance coverage with before-tax dollars.
For convicts convicted by the Syariah courts, the department is bound by section 125 and section 126 of the states' Syariah criminal procedure enactments which allows the Prison Department to perform Syariah whipping punishments on male and female convicts regardless of their age subject to declaration of medical fitness to undergo such punishments by a certified medical doctor.
Among the mandate under Section 125, the plans cannot be top heavy benefitting only highly paid employees.
One possible way for people with individual coverage to obtain the same tax benefits as employees is to pay for individual insurance through payroll deduction using a "cafeteria plan." Authorized by Section 125 of the Internal Revenue Code, cafeteria plans permit employers to offer voluntary benefits on a pre-tax basis.
He concentrates on plans operating under Section 125 of the Internal Revenue Code, but also considers other benefits, including health reimbursement arrangements and health saving accounts, adoption assistance, and reimbursed employee parking and mass transit expenses.
Premiums paid by employees are exempt as well if the firm has established a Section 125 cafeteria plan; roughly 80 percent of employees with insurance have such a plan.
Cafeteria plans, also described as "flexible benefit" plans or Section 125 plans, allow participating employees to choose between a number of non-taxable qualified benefits or taxable cash.
Current tax law prohibits small-business owners from taking advantage of benefits available through a Section 125 "cafeteria" plan--even if they set one up for their employees.
The first information report (FIR) against Varun was filed at Barkheda Police Station in Pilibhit under Sections 153 A (promoting enmity between different groups on ground of religion) and 188 (disobedience to order duly promulgated by a public servant) of the Indian Penal Code and Section 125 of the Representation of the People Act.