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  125 Cafeteria Plans
  Tax-Saving Strategies

A comprehensive employee benefit package often exceeds in cost what most employers are willing or able to pay. With the increasing awareness of rising healthcare many employers have adopted an IRS approved benefit plan that helps employees save 25% to 40% on the cost of healthcare.

We are proud to assist you in establishing your own tax-saving 125 Cafeteria plan.

What is a 125 Cafeteria / Flexible Benefit Plan?

In 1978 Congress enacted legislation that authorizes the establishment of "Cafeteria/Flexible Benefit Plans." A Section 125 Cafeteria plan allows participating employees to pay for a portion of their employer-sponsored benefit programs with before-tax dollars. This strategy can save both the employer and employee money!

  Who should consider establishing a 125 Plan?

Just about everyone! If any of your employees pay for a portion of their Health, Dental, Group Term Life Insurance, and some other programs, a 125 Cafeteria plan can:

  • Increase employee's take-home pay
  • Reduce the amount of payroll tax an employer spends!

I understand there are two types of plans available?

  That's right: Premium Only Plans (POP) and Full Flex Plans. POP plans are easy to install and can provide employees immediate paycheck increases. Full Flex Plans or Flexible Spending Accounts allow employees to use pre tax dollars to pay for out of pocket health care expenses, dependent care, and commuting to and from work.

What benefits can an employer expect?


When employees participate in your plan, each employee reduces his or her taxable wages. As a result, payroll and associated expenses are less. For example:

  • A reduction in the employer matching portion of FICA (Federal Insurance Contributions Act) tax;
  • A reduction in the employer paid portion of FUTA (Federal Unemployment Tax Act) tax;
  • In some instances a reduction in workers' compensation insurance costs.

An employer who establishes a 125 Cafeteria plan can, among other things, realize the following:

  • The ability to expand employee benefits;
  • Employee appreciation of your enhanced benefit package (Surveys prove that employee benefit packages are a major factor in successfully hiring and keeping quality employees).
  How does an employer establish a POP?

The “Signature Ready” POP Kit provides the following:

  • Plan Document
  • Summary Plan Description for distribution to employees
  • Election forms since, all employees must be given the opportunity to participate, election forms are required.
  • Educational brochures for employees
  • Video that explains the POP plan
  • Instructions for plan maintenance
  What will it cost to establish a 125 Cafeteria plan?

Quite possibly nothing! As a part of your services package, we are able to help you establish a 125 Cafeteria POP plan at no cost through a specially-prepared kit. It takes just a few minutes to explain.

Tine nationally recognized accounting firm of Mayer, Hoffman, McCann provide a toll-free hotline for any questions that may arise and website: