Cafeteria Plan / Section 125 of the IRS Code

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A Cafeteria Plan, the nickname for Section 125 of the IRS Code, is a benefit provided by an employer which allows an employee to contribute a certain amount of their gross income to a designated account before taxes are calculated (Pre-Tax Deduction), guarantees that the take-home amount will not change.

It provides the use to reimburse the employee for insurance premiums, medical, and dependent care expenses, as well as others. The employee incurs these compliant, qualified expenses throughout the plan year or claim period.

Guarantee employees will have no deductions in their take-home check, and the employer will have no out-of-pocket money, just saving that will increase the employer’s bottom line.

In January 2014, Congress approved that non-discriminatory, compliant wellness healthcare plans qualify under Section 125.

Why Install a Compliant Wellness Program?

In January 2014, Congress approved that education and participation in an approved, compliant wellness healthcare program would reduce the nation’s overall healthcare cost. 

The U.S. Center for Disease Control & Prevention states that employee behavior is the primary determinant of health, having as much effect as genetics, environment, and access to care combined. The CDC estimates that more than 75% of all U.S. healthcare costs are due to chronic conditions that are mostly preventable by reducing behavior-based risk factors (being healthier).

Congress and the CDC believe that behaviors can be modified, and employers can help employees by providing the appropriate tools to promote changing unhealthy behaviors and adopting new, healthier behaviors that will lower their health risks. No better proof than the Covid19 (Corona Virus). Those in better health conditions are most likely to have fewer problems in the event of getting contaminated. Proactive employers can adopt health plan designs that focus on the connection between behavior, health, and the cost of health care. This can, in turn, help employees take steps to lower health risks and fees and aim to ultimately increase their ability to fund a secure retirement.