Section 125 Plan/Cafeteria Plan

A Cafeteria Plan is regulated by IRS Section 125 which allows employees to pay certain expenses with pretax dollars thereby reducing the
employee's gross income and in turn lowering the amount the employee pays in Federal, FICA and sometimes State taxes. Employers incur
a tax savings too in FICA and sometimes Workers Compensation taxes.

There are several different types of pre-tax benefits that can be utilized under the Section 125 Cafeteria Plan:

Premium Only Plan (POP)
Flexible Spending Accounts (FSA)
Individually Owned Insurance (Ind FSA)

Premium Only Plan (POP)

POP plans allow for the certain group health insurance premiums to be paid with pretax dollars. This results in a tax savings for the
employee (Federal, FICA, and sometimes State) as well as the employer (FICA and sometimes Workers’ Compensation). Group health
insurance premiums allowed to be paid with pretax dollars include:

Health
Dental
Vision
Disability (although not recommended because benefits would be taxed if premiums paid with pretax dollars).
Accident
Cancer
Critical Illness
Hospital Indemnity

Flexible Spending Account Plan (FSA)

An FSA is an account into which pre-tax earnings for medical and/or dependent care expenses are deposited. It functions like a checking
account in that the cafeteria plan administrator actually writes checks to participants for the medical and dependent care expenses that
they submit.

Individual Flexible Spending Account Plan (Ind FSA)

Individual FSA plans allow for the certain individual insurance premiums to be paid with pretax dollars. This results in a tax savings for the
employee (Federal, FICA, and sometimes State) as well as the employer (FICA and sometimes Workers’ Compensation). Individual insurance
premiums allowed to be paid with pretax dollars include:

Vision
Dental
Short and long term disability (although it is not recommended that you pay with pretax dollars)
Accident
Critical illness
Hospital indemnity
Cancer.

Individual plan premiums that are not allowed to be paid with pretax dollars include major medical, Medicare Part B, Medicare Part D,
Medicare Supplement, Medicare Advantage, Long-Term Care and life. These individual plan premiums are not allowed under a POP plan
either.