Section 125 Plans (cafeteria Plans)
Definition of "Section 125 plans (cafeteria plans)"
Additions made by Congress in 1978 to the Internal Revenue Code that provide an employee benefit plan under which the employee makes an irrevocable decision to forego a portion of future income in exchange for receiving future benefits not subject to income tax at reception date. The employer deducts the cost of the employee's future benefits from present income as a business expense. These plans usually provide three options:
- Premium Conversion Employee contributes a proportionate share of the family health care costs with pre-tax dollars.
- Medical Reimbursement Account Employee is able to use a SALARY REDUCTION PLAN to pay with dollars on a pre-tax basis for medical expenses not covered by insurance; a separate medical reimbursement account is established for each employee.
- Dependent Care Reimbursement Account Employee is able to use a salary reduction plan to pay with dollars on a pre-tax basis for dependent care expenses.
Popular Insurance Terms
Dwelling insurance is how it’s called the most obvious coverage type under the homeowner’s insurance umbrella. It deals with the damages done to the physical structure of the ...
Additional amount of life insurance above that provided by the employee benefit plan (standard group life plan) that may be chosen by the employee. A limit is usually placed on this maximum ...
Methods of handling policyholder dividends. In a participating life insurance policy, dividends are paid to the policy owner according to which of the following options is selected: applied ...
Trade association of property and casualty insurance companies that do not have membership in a rating bureau. These companies do not follow standard rates and forms authored by a rating ...
In many property insurance policies, a requirement that the insured carry insurance as a percentage of the total monetary value of the insured property. If this percentage is not carried, ...
Account that is similar in form to the health plan flexible spending account (FSA) with contributions to this account used to reimburse employees who are parents for expenses at a ...
Arrangement by which a policy owner authorizes an insurance company to draft his checking account for premiums due on an insurance policy. The drafting is usually monthly, persistency of ...
Means of funding permitted under the employee retirement income security act of 1974 (ERISA). The administrator of a pension plan can comply with required minimum funding standards by ...
New rule entitled "Employers Accounting for Postemployment Benefits," which requires advanced recognition of nonretirement benefits, health insurance continuation, and severance pay. ...
Have a question or comment?
We're here to help.