Self Employment Tax Credit Specialist

Section 125 Cafeteria Plan | Cafeteria Plan 125

Business Owners Save $500-800 Per Employee Annually While Improving Employee Benefits & Take Home Pay.

The Champ Plan and Encompassing Health are Section 125-cafeteria plans. They are employer sponsored, voluntary, self-funded benefits plans.

Section 125 Cafeteria Plan Explained

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FICA Together flourishes through collaboration, specializing in Section 125 Consulting Services and operating on a contingency-based approach. Our success is tied to yours. Through our shared success model, we are fully committed to securing favorable outcomes for your business. Your victory is our victory! Let's collaborate to propel your business to new levels of success.

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Our dedicated team is entirely focused on this initiative. We are experts in Section 125, ensuring a smooth process for your benefits. With our proficiency and dedication, we simplify the procedure, ensuring convenience and efficiency for you. While we manage the intricacies, you can concentrate on the advantages of receiving our service promptly and hassle-free through the completion of your Section 125 requirements.

What is Section 125 Cafeteria Plan?

A Section 125 Cafeteria Plan is an employer-sponsored benefits program designed to empower employees to pay for specific qualified medical expenses, such as health insurance premiums, on a pre-tax basis. Functioning much like the diverse options available in a cafeteria, this plan allows employees to select and tailor their healthcare benefits according to their preferences, including medical, dental, vision, and more, while opting out of those they don’t require.

It's important to clarify that a Section 125 Cafeteria Plan does not provide health insurance itself. Rather, it offers employees the opportunity to utilize pre-tax funds to choose and finance the benefits they deem essential, which may encompass health insurance among other options.

Requirements for Section 125 Cafeteria Plans:
Cafeteria Plans are mandated to include: At least one taxable benefit option, integral to the employee’s salary. At least one qualified pre-tax benefit. In terms of the taxable benefit option, employees who enroll in a Section 125 Cafeteria Plan might have the opportunity to redirect the cost of their conventional group healthcare plan premium as an additional cash component to their salary. This contribution can then be allocated towards another benefit of their choice. However, if received as cash, this amount is subject to taxation. Employees who opt out of the cafeteria plan may not receive this premium cost as compensation.

Qualified pre-tax benefits range from health and disability insurance to Flexible Spending Accounts (FSAs), Dependent Care Assistance Plans (DCAPs), Health Savings Accounts (HSAs), and contributions towards retirement plans.

Benefits of Cafeteria Plans for Employees:
The principal advantage for employees lies in the array of healthcare options available through Section 125 funds, tailored to their individual needs. Typically, these pre-tax options include health insurance premiums, retirement contributions, or other benefit choices. If none of the offered benefits are desired, employees may opt for alternatives such as cash, supplemental life insurance, or disability insurance. Additionally, employees can potentially reduce their taxes by contributing to the Cafeteria Plan before tax deductions are calculated.

Section 125 Cafeteria Plan Benefits to Employers

Here are some noteworthy Section 125 Cafeteria Plan options that offer significant tax and cost-saving benefits for employees:

Flexible Spending Accounts (FSAs): Enabling pre-tax payment for qualified out-of-pocket medical expenses.

Health Savings Accounts (HSAs): Similar to FSAs but with employees owning their accounts, providing flexibility even if they change employment.

Dependent Care Flexible Spending Accounts (DCFSAs) or Dependent Care Assistance Plans (DCAPs): Allowing pre-tax allocation of funds for dependent care services, easing the financial burden of childcare or care for elderly or disabled dependents.

Benefits of Cafeteria Plans for Employers:

Section 125 Cafeteria Plans also present several substantial advantages for employers, particularly small business owners:

Reduced payroll taxes for employees participating in the plan, thereby lowering the employer's FICA matching, FUTA, SUTA, and Workers' Compensation costs.

Potential offsetting or reduction of costs associated with offering the cafeteria plan due to lowered payroll taxes.

Enhanced attractiveness of benefits package, potentially decreasing turnover and attracting new talent.

Management of unused FSA funds with "use it or lose it" provisions, which revert to the employer at the end of the plan year or upon employee departure.

Points of Interest:

Despite the mutual benefits for both employees and employers, certain considerations should be noted:

Implementing and administering Section 125 Cafeteria Plans can be complex and require careful attention.

Employees are typically locked into their designated contributions for a full year, with limited exceptions for changes.

Unused FSA funds may have rollover options or grace periods for usage, but funds not meeting these criteria are forfeited to the employer, including upon employee departure.

In conclusion, Section 125 Cafeteria Plans offer cost-effective benefits for companies, aiding in cost savings while catering to diverse employee needs. For assistance with plan creation and compliance matters, it's advisable to consult a qualified third-party benefits administrator or benefits counsel.

What Is Included in a Section 125 Plan?

A Section 125 plan typically allows employees to utilize pre-tax funds for covering health insurance premiums, spanning medical, dental, and vision care. Additionally, employees can allocate funds towards retirement contributions, supplemental life or disability insurance, Health Savings Accounts, and various medical or dependent care expenses.

Win - Win Opportunity

Use It or Lose It

Section 125 plans mandate using remaining funds by year-end, forfeiting them otherwise, though a 2013 provision permits rolling over up to $500. Despite potential excess funds, contributing to a cafeteria plan can still yield benefits. For example, depositing $1,000 with $100 leftover translates to $240 tax savings (at a 24% marginal tax rate), resulting in a net benefit of $140 even after forfeiture.

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Setting Up a Section 125 Cafeteria Plan

Establishing a Section 125 plan follows a clear process. Employers need to furnish appropriate documentation, inform employees, and conduct nondiscrimination testing. Three critical tests evaluate whether the plan unfairly favors highly compensated or key employees: eligibility, benefits and contributions, and concentration.

Cafeteria plans offer varying benefits. A Premium-Only Plan (POP) permits employees to pay their share of insurance premiums pre-tax. The Flexible Spending Account (FSA) variant allows pre-tax payment for out-of-pocket qualified expenses.

A comprehensive option is the Consumer-Driven Healthcare (CDHC) plan. This entails a credit system empowering employees to allocate funds at their discretion for qualified expenses. Employees can augment the CDHC with personal funds for additional benefits or coverage.

Employers must engage a qualified Section 125 third-party administrator who can provide current documentation and ensure compliance with evolving regulations. These administrators typically offer updated plan documents, summaries, legal review, discrimination testing, and educational resources for employees.

Who Isn't Eligible for a Section 125 Cafeteria Plan?

The regulations of Section 125 explicitly exclude certain individuals from participating in the plans. These include self-employed individuals and partners within a partnership. Furthermore, shareholders holding more than a 2% stake in a subchapter S corporation are also ineligible to participate. These restrictions aim to maintain the integrity and fairness of Section 125 plans by delineating participation criteria and ensuring equitable access to benefits among eligible employees.

The Bottom Line Summary of Section 125 Cafeteria Plan?

In summary, a Section 125 plan enables employees to allocate insurance premiums and additional funds before taxes, resulting in potential tax savings ranging from 20% to 40% annually. Notably, these plans also provide employers with tax-saving advantages. Therefore, it may be beneficial to propose implementing such a plan to your employer or consider it when seeking employment, as joining a company offering a cafeteria plan could be advantageous in terms of tax benefits.

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Am I eligible for the Section 125 Cafeteria Plan?

Self Employment Tax Credit Specialist

Frequently Asked Questions on Section 125 Cafeteria Plan

Who is Champion Health, Inc?

Champion Health, Inc. has built a foundation on two valuable principles: Honesty and Integrity. Our faith and values stem from the Golden Rule: “Do unto others as you would want them to do unto you.” You can count on us to lead by example, be excellent stewards of your bottom line, and make your life less complicated. We are committed to giving you a first-class experience in everything that we do and providing exceptional and personalized service to each of our clients that is second to no one. We understand the complexities of healthcare and its benefits. We constantly evaluate our solutions based on the current healthcare and benefits landscape, keeping us focused on what new, innovative concept or product could be better for you. By partnering with us, we will deliver a better benefits solution than you can get anywhere else.

What is the CHAMP Plan™ that we provide?

The CHAMP Plan™ is a unique and innovative healthcare solution designed to complement primary health insurance coverage by providing an employee with unlimited Primary Care/Urgent Care visits, 100% preventive care benefits, and zero-dollar copays for primary care or urgent care visits. It provides for the employee important healthcare cost containment benefits, such as unlimited access to their own Personal Health Assistant. The CHAMP Plan™ also includes for both employee and their family unlimited prescriptions for acute and prevention*. Unlimited Virtual Direct Primary Care is also offered to the entire family. Finally, an employee-focused health benefits package that improves their physical AND financial wellbeing! No copays. No deductibles. No coinsurance. No worries! The CHAMP Plan™ was also designed to engage employees in technology specifically developed to improve their health! All an employee must do is something they already do many times a day: check their email or get on their phone for about the same amount of time as scrolling through their Facebook feed! Our technology is one of the most innovative, intuitive, and interactive Wellbeing Management applications on the market. Employees will receive a Health Score by dedicating about 10-15 minutes each month to answering personalized and interactive health assessment questions through their online portal or Mobile App. Each month, the employee will be required to complete a personal resolution or activity to improve their Health Score! Our goal is to help employees learn how to make healthier choices and take a more proactive approach to manage their greatest asset: their health. Employees who satisfy these assessments each month will typically receive an increase in their net take-home pay which can be used by the employee however they want to use it. We put employees in complete control of those extra dollars.

Do I have to change insurance?

No. The CHAMP Plan™ is a self-funded overlay program that supplements existing traditional medical insurance plans.

Do employees need to change providers or medical care?

No. Employees who voluntarily enroll in The CHAMP Plan™ can continue to use the same providers and receive the same medical care they’re already receiving through their traditional medical insurance. The CHAMP Plan™ can provide additional options for better quality care and cost savings as identified by the physician of record, but employees are not required to take those options.

How do I implement this plan to my employees?

It’s simple! Once you send us a copy of the census, we can begin to identify your potential savings per employee.

What benefits are included?

Unlimited access to Concierge’s advocate approach to health care. It’s having a doctor available 24/7 at your beck and call. Resolve workplace misconduct easier and smarter with Champion Work Shield. Champion Work Shield is an unbiased third party that works to efficiently manage reporting, investigation and resolution of workplace harassment, discrimination and misconduct issues in their entirety.

What prescriptions are covered?

A robust list of nearly 200 generic and brand name prescriptions is covered by The CHAMP Plan™, including many of the nation’s top-prescribed drugs such as simvastatin and atorvastatin for high cholesterol, amlodipine and lisinopril for high blood pressure, levothyroxine for hypothyroidism, and bupropion for tobacco cessation, as well as antibiotics like azithromycin and amoxicillin, pain management medications like gabapentin and meloxicam, and mental health medications like lorazepam and clonazepam (see formulary list for full details). Prescriptions not on the list may also be covered at a significant discount.

Is The CHAMP Plan™ compliant?

Yes. The CHAMP Plan™ is a qualified Section 125 plan set up as a self-funded employer-sponsored plan that is 100% funded by employees through a pre-tax payroll deduction. The amount deducted represents the maximum claims for the policy year. The third-party administrator (TPA) holds the monies in a custodial account and pays claims as they incur in accordance to the plan document and the schedule of benefits. The definition of a claim is defined as claims made to providers, facilities, pharmacies, or employees. Claims to employees result when an applicable CPT code is triggered with a corresponding explanation of benefits (EOB). Examples of these claims include preventive examinations, bio-metric screens, health risk assessments, and chronic medication fulfillment. Claims made to employees are neither taxable nor considered ordinary income. The amount of premium charged to employees is actuarially set to cover the claim risk on the plan while meeting a desired medical loss ratio (MLR). At the end of the plan year and the runout period, any potential surplus left in the claim account is considered a plan asset to the employer.

Does The CHAMP Plan™ meet the definition of Minimal Essential Coverage (MEC)?

Yes, The CHAMP Plan™ meets the definition of MEC.

How much does the CHAMP Plan™ cost?

The CHAMP Plan™ is funded by the tax savings generated, so there is NO out-of-pocket cost!

Is there a copay for the CHAMP Plan™ virtual direct primary care benefit?

No. The virtual direct primary care benefit is a $0 copay benefit. All family members living in the home receive this benefit.

My primary health plan covers preventive care also, is this duplicate coverage?

If an employee’s primary health plan is ACA compliant, it will also cover preventive services. One of our many goals with the CHAMP Plan™ is to drive healthcare utilization away from an employee’s primary health plan. We want employees to get better and faster care, for less money! By helping employees utilize their healthcare benefits more effectively and efficiently, we will accomplish lower costs for healthcare together. Employees that are not on the company health plan can still participate. Think about this for a moment: the more employees use their primary health plan, the higher the claims will be on that plan. That has a direct correlation to how high premiums are. If we spread the cost of healthcare to other coverage and benefits, we can drive the cost of an employee’s healthcare down, and the employees are taking better advantage of their benefits! With the CHAMP Plan™, it sheds the utilization away from your primary plan.

What benefits do I get with the CHAMP Plan™?

The CHAMP Plan™ provides many benefits for employees, their spouse, and family! Here is a listing of the benefits available: (See all details on fulfillment documentation) For Employee: $0 copays for primary care and urgent care office visits $0 copay for unlimited 24/7 virtual direct primary care $0 copay for unlimited prescription drugs for acute and prevention Health Coaches Wellbeing management technology – innovative and intuitive software that helps employees take a proactive approach to their healthcare. For Spouse and Family: $0 copays for unlimited 24/7 virtual direct primary care $0 copays for unlimited prescription drugs for acute and prevention

What types of benefits are covered under “Preventive Care”?

The CHAMP™ Preventive Care benefits cover the services required to be covered under ACA guidelines for the employee.

Will my CHAMP plan™ cover name-brand prescriptions?

The CHAMP Plan™ covers a long list of generic and name-brand prescriptions at 100% (see the formulary list.) The plan will also cover prescriptions not on the list at a significant discount.

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