A Section 125 plan, also known as a "cafeteria plan," is a type of employee benefit plan that allows employees to choose among various pre-tax benefits. Here are key features:
Flexibility: Employees can select benefits that best suit their needs, such as health insurance, dental, vision, and flexible spending accounts (FSAs).
Pre-Tax Contributions: Contributions to these benefits are made using pre-tax dollars, reducing taxable income and leading to potential tax savings for both employees and employers.
Employer Contributions: Employers can offer a variety of benefits, and they may contribute a certain amount towards the plan, enhancing the value for employees.
Compliance: Section 125 plans must meet specific IRS requirements, including providing a written plan document and ensuring that the benefits offered are not discriminatory.
Overall, Section 125 plans provide a customizable benefits package that can improve employee satisfaction while offering tax advantages.
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