Specialty Insurance Programs

Personal Insurance

Group Health Benefits

FAQ's

Cafeteria

Cafeteria Plans

Employees of employers with a Section 125 (Cafeteria) Plan may obtain such benefits as health insurance, group-term life insurance, and flexible spending accounts through the plan. Most Cafeteria Plans are operated through a "salary reduction agreement", which is a pre-tax payroll deduction. Salary reduction contributions are not actually or constructively received by the participant. Therefore, those contributions are not considered wages for federal income tax purposes. In addition, those sums generally are not subject to FICA and FUTA.

Reasons for implementing a Section 125 plan are primarily for the tax savings advantages for the employer and employee. Employees' pretax contributions are not subject to federal, state, or social security taxes. Employers save on the employer portion of FICA, FUTA, and Workers' Compensation premiums.