CORNERSTONE BENEFITS AND INSURANCE
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Cafeteria Plans

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Cafeteria Plan Basics

Code Section 125 allows employers to establish a type of tax savings arrangement, called a Section 125 plan or cafeteria plan, for their employees. A Section 125 plan provides employees with an opportunity to pay for certain benefits on a pre-tax basis, allowing them to increase their take-home pay. Employers may also make nontaxable contributions to a Section 125 plan for their employees.

Under a Section 125 plan, employees choose between at least one taxable benefit (such as taxable compensation) and one or more qualified benefits. Qualified benefits include, for example, the following commonly offered employee benefits:
  • Group health plans;
  • Vision and dental plans;
  • Health flexible spending accounts (FSAs);
  • Dependent care assistance programs (DCAPs); and
  • Health savings account (HSAs)
According to the IRS, a Section 125 plan is the only means by which an employer can offer employees a choice between taxable and nontaxable benefits without causing adverse tax consequences to the employees. To avoid taxation, the Section 125 plan must meet the specific requirements of Code Section 125 and underlying IRS regulations. 
Tax Rules: Employees who elect to participate in a Section 125 plan agree to contribute a portion of their salaries on a pre-tax basis to pay for the qualified benefits. These contributions, which are called “salary reduction contributions” are not considered wages for federal income tax purposes, and are generally not subject to Social Security and Medicare tax (FICA) or federal unemployment tax (FUTA). This reduces employees’ taxable income, which results in a savings for both employees and employers.
(702) 242-9000
8919 West Sahara Avenue
​Suite 150
Las Vegas, NV 89117​
Click Here to Email Us

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Licensed in Nevada, Arizona, and California for Employee Benefits, Individual Health Insurance, Medicare, Life Insurance and Long Term Care

Licensed in Nevada for Business Insurance and Personal Insurance.


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Cornerstone Benefits, LLC
8919 West Sahara Avenue
​Suite 150
Las Vegas, NV 89117
(702) 242-9000
Click Here to Email Us

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  • Home
  • Products & Services
    • Business Insurance
    • Employee Benefits >
      • Fully Insured Health Plans
      • Level & Balanced Funded Health Plans
      • Self-Insured Health Plans
      • Association Health Plans
      • Dental Plans
      • Vision Plans
      • Management Carve Outs
      • Life Insurance and AD&D
      • Cafeteria Plans
      • Flexible Spending Accounts
      • Voluntary Benefits
      • Group Disability Plans
      • Human Resources Consulting
    • Health Insurance
    • Life Insurance
    • Long Term Care Insurance
    • Medicare >
      • Medicare Agents >
        • Lauren Koutsoumbas
        • Cecile Faith Bautista
        • Dalyce Lazaris
        • Olivia Castillo
        • ​Andrew Segal
    • Personal Insurance
  • About Us
    • Meet the Team
    • Client Testimonials
    • Insurance Carriers
    • Accessibility Statement
  • Contact Us