S. 125 CAFETERIA PLANS & FSA
The combination of Internal Revenue Code Sec. 125 and the Tax Reform Act bring some important, basic allowances for employers. They created an important tool for employers to assist in the administration of benefit programs. These allowances are already being taken advantage of by employers looking to attain their employee benefits’ goals.Specifically IRC S125 allows:
- Reduction in tax liability for both the employee and employer.
- Alternative funding mechanisms for qualified benefits.
- Expanded benefits choices including “cash” in exchange for health insurance benefits.
From these three allowances comes the process of Flexible Benefits. This process can provide any employer the strategy of managing the escalating costs of its benefits program. There are three types or stages of S125 Benefits Plans. They include Salary Conversion Plans, Benefit Exchange Plan and Full Flexible Benefit Plans.