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Celebrating 40 Years of Tax-Saving Section 125 Cafeteria Plans

Core Documents,Inc
Posted on: 06 Nov 18
Celebrating 40 Years of Tax-Saving Section 125 Cafeteria Plans To celebrate the 40th birthday of the Section 125 Cafeteria Plan, Core Documents, Inc., presents a six-part series on the history of this valuable (but oft-forgotten) tax-saving benefit.

PR Newswire

BRADENTON, Fla., Nov. 6, 2018

BRADENTON, Fla., Nov. 6, 2018 /PRNewswire-PRWeb/ -- Believe it or not, every paycheck brings millions of Americans a helpful little boost from the U. S. Treasury. It usually goes unnoticed and taken for granted. It seems that it has always been there and always will be. Most Americans might be surprised to learn that U. S. Code Section 125 -- which governs the tax-saving provisions of employer Cafeteria Plans – came into the law only 40 years ago, on November 6, 1978.

To celebrate the 40th birthday of the Section 125 Cafeteria Plan, Core Documents, Inc., presents a six-part series on the history of this valuable (but oft-forgotten) tax-saving benefit to American employees and their dependents.

If not for Section 125 of the Code, many workers would not be able to afford the group health insurance offered by employers. Those who could afford it would pay about a third more for coverage without the Code's tax-favored treatment of salary deductions for group health benefits under Section 125 plans.

Employers save, too, because pre-tax employee payments into Section 125 plans reduce overall payroll expense. That usually means no FICA, FUTA, or other payroll tax paid on those dollars. The employer tax savings on those pre-tax employee premium payments and flex plan contributions is usually 8% to 10% -- more than enough to cover any administrative costs to manage the plan.

Core Documents thinks this much in tax savings is worth celebrating. We present this series so that employee and employer alike can learn more about Section 125 Cafeteria Plans and then celebrate with us (in your own small way).

The Section 125 Plan 40th Birthday series begins with a look at the history of the medical expense tax deduction, followed by how (and why) the Treasury proposed adding Section 125 to the Code.

Next is how employers created Flexible Spending Accounts (FSAs) behind the Treasury's back, and how Congress helped mediate a compromise between the parties.

Then, learn how the Affordable Care Act (ACA) had a big impact on the ways employers could use Section 125 Cafeteria Plans to help employees with health care costs. Not surprisingly, new rules applied and choices declined – especially for small employers – but the essential benefits offered via Section 125 Plans survived.

The closing segment looks at the status of Cafeteria Plans today and possible changes in the near future.

The series Celebrating 40 Years of Section 125 Cafeteria Plans begins @ http://www.coredocuments.com/40years/. Links to the next article as well as those for all other items in the series are at the bottom of each page.

Since 1997, Core Documents, Inc., has been the Trusted Source in affordable plan documents for Section 125 Plans and Health Reimbursement Arrangements (HRA). Our convenient plan document packages provide employers with everything they need to establish an IRS- and DOL-compliant tax-saving benefit. Core Documents offers free plan design, consultation, and support to clients before and after putting their plans in place. Visit our website at http://www.coredocuments.com today to learn more.

 

SOURCE Core Documents, Inc

PR Newswire
www.prnewswire.com

Last updated on: 06/11/2018

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