Freedom Benefit Solutions

	Section 125 Cafeteria Plan
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OVERVIEW OF SECTION 125

(Cafeteria Plan)

In the mid 70's as a result of companies lobbying, Congress for tax relief on employee benefits, Section 125 was adopted to provide incentives for the establishment of quality benefit plans. Section 125 offers a menu of benefits that allows individuals to best suit their needs. Cafeteria Plans as Section 125 plans are commonly referred to, have become one of the fastest growing fringe benefits offered. Cafeteria Plans provide several benefits to both the employer and the employee. An employer that has incorporated the cafeteria plan may recognize the following:

Both the employer and the employee may recognize significant tax savings from their participation in the plan.
If the minimum product requirements have been met, a Cafeteria Plan can be designed, implemented, and administered at no cost for a premium only plan through Wells Fargo Flex Benefit Services. This normally will enable the employer to realize a significant tax savings immediately upon implementing the plan.
In many instances, the enhancement of benefits as a result of a Cafeteria Plan, will help attract and keep good employees.
Normally a Cafeteria Plan will not require a change in a company's currently established benefit package.

Cafeteria Plans can vary from simple to administer Premium only Plans to Full Flex Plans which require benefit claims processing and detailed accounting. A large number of companies start with premium only plans and then change to full flex plans as the become accustomed to Section 125 and realize the potential for savings.

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