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
Reinstatement of an insurance policy or bond to its original face amount (face of policy) after the payment by the insurer of a loss. The purpose of this type of coverage is to indemnify ...
Coverage against loss as the result of a burglary. Found as part of the commercial package policy that has generally replaced the special multiperil insurance (smp) policy and the ...
Sum provided by a disability income insurance that pays a multiple of the monthly indemnity to cover the costs associated with a retraining course attended by the insured wage earner when ...
Market in which buyers dominate trading and force financial asset prices up. ...
Social insurance that provides benefits to temporarily disabled workers in a few states. Five states require employers to pay cash benefits if workers are disabled. They are Rhode Island, ...
Association of life insurance companies focusing on legislation and public relations that may affect the life insurance business on federal, state, and local levels. Membership is composed ...
Method of calculating the life insurance policy's cash surrender value (CSV) not contingent upon the calculation of the policy's reserve such that the CSV will approximate the asset share ...
Trust under which the beneficiary (cannot be a charitable beneficiary) receives a fixed percentage (not less than 5% of the trust's annual value) of the net fair market value of the trust ...
New pension-accounting rule created by the Financial Accounting Standards Board. The objective of this rule is to clarify pension accounting so that investors, employers, and employees will ...
Have a question or comment?
We're here to help.