Section 125 cafeteria plans provide the gateway to employee pre-tax contributions for health and welfare plan benefits and FSAs.  Employers’ ability to offer pre-tax salary reduction contributions is the product of a complex system of cafeteria plan rules designed to avoid constructive receipt—a concept that most have never considered.  The Section 125 irrevocable election, plan document, use-it-or-lose-it, and other key rules are very strict, and there is no correction program to prevent a potential full loss of tax-advantaged status upon plan operational failures.  

This session of Newfront Office Hours covers the key Section 125 cafeteria plan rules that all employers should understand.

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