Flexible Benefits Plan, Cafeteria Plan or Section 125 Plan are all terms which can be used to describe the same arrangement - the ability of the employer to allow his employees to purchase certain benefits on a pre-tax basis. This arrangement can offer significant savings for employees.

Section 125 Plans typically have up to three components:

Healthcare Premium Reduction - enables the employee to pay his contributory share of a medical or dental plan premium with pre-tax dollars, thus saving federal, state and FICA taxes on that deduction amount.

Healthcare Reimbursement Account - designed to allow the employee to set aside, through payroll deduction, monies that can be used to pay for Healthcare (medical, dental, vision) expenses that are not covered under the employee's healthcare insurance programs. The result is that your employee pays for these expenses with pre-tax dollars.

Dependent Care Reimbursement Account - designed to allow the employee to set aside, through payroll deduction, monies that can be used to pay for Dependent Care(daycare, babysitter, elderly care) expenses. Again the result is that the employee pays for these expenses with pre-tax dollars.

This type of program is popular with both employers and employees since both can realize substantial tax savings.

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