Feb 3 • Marketing & Growth Strategies
Decoding Section 125 Cafeteria Plans: Beyond the Basics
The foundation of modern benefits strategy often overlooks the full potential of Section 125 Cafeteria Plans. While most HR professionals understand the pre-tax advantage, there's a deeper layer of opportunities that many organizations miss.
Core Components That Drive Value:
Premium Only Plans (POP) These plans reduce both employer and employee tax liability on insurance premium payments. What's often overlooked is how POPs can be structured to accommodate various insurance types beyond basic health coverage. This includes dental, vision, and even certain supplemental policies.
Flexible Spending Accounts (FSAs) The evolution of FSAs has introduced new flexibility in plan design:
- Healthcare FSAs can now offer grace periods or carryover options
- Dependent Care FSAs help attract and retain working parents
- Limited Purpose FSAs complement HSA strategies
Health Reimbursement Arrangements (HRAs) Modern HRA designs have expanded beyond traditional models:
- Individual Coverage HRAs (ICHRAs) offer new market solutions
- Qualified Small Employer HRAs (QSEHRAs) provide options for smaller businesses
- Excepted Benefit HRAs add flexibility to existing plans
Compliance Framework: Recent IRS guidance has clarified key areas:
- Non-discrimination testing requirements
- Documentation standards
- Election change rules
- ERISA interaction guidelines
Implementation Best Practices:
- Start with a comprehensive needs assessment
- Document all plan components clearly
- Establish clear communication channels
- Create measurable success metrics
- Regular compliance reviews
Understanding these components allows organizations to build more sophisticated benefits strategies that serve both employer and employee needs while maintaining full compliance.
💡 Which Section 125 component have you found most valuable in your client solutions? Share your insights.
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Decoding Section 125 Cafeteria Plans: Beyond the Basics
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