By Ryan Schweizer, client executive, OneDigital Health and Benefits
What is a section 125 plan?
A section 125 plan, often referred to as a cafeteria plan or POP plan, provides a means for employers to create a tax savings arrangement for their employees to pay for certain benefits on a pretax basis. This arrangement increases the employee’s take home pay, reduces the employee’s taxable income, and therefore, also reduces the employer’s tax liability. Section 125 plans must comply with certain rules and regulations under the Internal Revenue Code.
What are the legal requirements?
A Section 125 plan is the most popular means by which an employer can offer employees a choice between taxable and nontaxable benefits without causing adverse tax consequences to the employees. To avoid benefit taxation, the Section 125 plan must meet the specific requirements of Code Section 125 and underlying IRS regulations, including:
What are the different types of section 125 plans?
Premium Only Plan (POP)
Flexible Spending Arrangement (FSA)
Full Cafeteria Plan
Simple Cafeteria Plan
So who needs a section 125 plan?
Reach out to OneDigital to find out. Contact Ryan Schweizer at rschweizer@onedigital.com or 214-389-9661.
OneDigital Health and Benefits is a five-star premier business partner of Credit Union Resources, Inc., a wholly owned subsidiary of Cornerstone Credit Union League.
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