Cafeteria Plan

A Section 125 Cafeteria Plan allows employees to withhold a portion of their salary on a pre-tax basis to cover the cost of group health insurance premiums or qualifying supplemental benefit premiums that are part of an employer-sponsored plan, Health Flexible Spending Account (FSA) and/or Dependent Care FSA. You can set up the plan to include just the premium-only plan or all three components.

Section 125 Cafeteria Plan benefits are free from federal and state income tax, which reduces an employee’s taxable income, and the employer also enjoys a reduction in their payroll tax liability.

​To be able to withhold any deferrals from an employee’s paycheck, you must have the proper documentation in place. Section 125 of the IRS code requires an employer have a written plan document in place regardless if your plan will cover one or 1,000 employees. 


For more information regarding this coverage, email or call 800-944-7550.

Additional Resources