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Employee Benefits:  Cafeteria/Section 125 Plans in Andover, Burlington, Haverhill, Peabody, Salem,
and all of Eastern Massachusetts.


The employee benefit that benefits employers

Under the jurisdiction of IRS Code Section 125, Cafeteria plans offer employees a chance to earmark funds to pay for qualified medical, dental and vision-related expenses. These funds are deposited into a Flexible Spending Account (FSA) on a pre-tax basis and offer employees more of a benefit than the obvious savings.

Since these benefits are free from federal and state income taxes, the employee’s taxable income is reduced. That means their take-home pay actually increases. There’s an equally attractive benefit for employers who participate in Cafeteria plans. Since pre-tax benefits aren’t subject to federal social security withholding taxes, employers don’t have to pay FICA or worker’s compensation premiums on those dollars. By introducing a Cafeteria plan, your company improves the appeal of your employee benefit package while boosting the company profit margin.

One of the most attractive attributes of the Section 125 plan is the fact that your employees are already spending the money they will be contributing…only they’re spending after-tax dollars. A Cafeteria plan allows them the opportunity to save money that they are already spending on out-of-pocket medical expenses, such as insurance deductibles, co-payments, prescriptions, over-the-counter drugs and other miscellaneous medical expenses.

Here’s why every employer should offer a Cafeteria / Section 125 Plan:

  • Each dollar deposited into the Cafeteria plan reduces your payroll. That means employers don’t pay FICA or worker’s comp premiums on that money. This can represent up to a 20% savings for employers on each dollar deposited into the plan.
  • Employees can reinvest their tax savings in retirement plans. When using an FSA, your employees are saving cash on everyday expenses, thus increasing disposable income that can be allocated to their 401(k) account, which increases participation.

Talk to your Designed Benefits Group agent today and discover how to use the tax code to your advantage while providing a valuable benefit to your employees.