In Simple Terms... What is a Section 125?

There are two general forms of a Section 125, POP and a Cafeteria Plan.

Premium Only Plans (POP)

Allows employees to pay their portion of insurance premiums on a pre-tax basis, thereby increasing take-home pay. Employers pay less FICA and State income taxes on the aggregate amount re-directed.

Flexible Spending Accounts (Cafeteria Plan)

Allows employees to re-direct a portion of their salary into an account banked for that employee on a pre-tax basis. Employees are reimbursed from that account for qualifying expenses which include unreimbursed medical expenses (deductibles, co-insurance, dental, vision etc.) and dependent care expenses. Employees net take-home pay increases and employers pay reduced FICA and State income taxes on the aggregate amount re-directed.

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