FSA & Section 125 Cafeteria plans


An FSA empowers you to keep more of your hard-earned money. Plan your spending, know the rules and unlock amazing tax savings for both the employee and employer!

Every year, Section 125 Cafeteria plans save employees and employers millions of dollars through pre-tax salary deductions to pay premiums for health insurance. Also known as a premium-only or cafeteria plan, it can be expanded to include supplemental benefit premiums, flexible spending arrangements, and employer-funded only HRA’s.

Employees can pay qualified medical, dental, or dependent-care expenses on a pretax basis, which has the effect of reducing the employee’s taxable income as well as save the employer’s federal and state tax liabilities, where applicable. With health care costs continually on the rise, a Section 125 plan can not only enhance your employee benefits package it also offers payroll expense savings such as reducing cost on worker’s compensation premiums and more.

Who can participate in a Section 125 Plan?

Eligible employees of regular corporations, S corporations, LLCs/LLPs, sole proprietorships, and non-profits can all reduce taxes as part of an employer’s Section 125 plan.

Eligible Plans administered by The Payroll Factory-

Premium Only Plan (POP) allows employer-sponsored premium payments to be paid by the employee on a pretax basis. Coverage may include the following: Healthcare. Dental. Vision.

Health Flexible Spending Accounts (FSAs) An FSA allows employees to pay for qualified out-of-pocket medical expenses on a pre-tax basis. If the FSA is the only benefit provided, employees may use the account to cover health insurance premiums.

Dependent Care Assistance Plan (DCAP) A DCAP allows employees to set aside up to $5,000 a year pre-tax to pay for dependent care services. This allows working parents the ability to save on child care while they are at work or attending school.

Commuter Transit Expense Account pay for public transit—including train, subway, bus, ferry or vanpool—as part of the daily commute to and from work. It’s a great way to put extra money each month to make the employees commute more convenient and affordable.

Health Reimbursement Arrangement Accounts (as well as QSEHRA) medical expense reimbursement plan funded by an employer for its employees. Reimbursements through an HRA are tax-deductible for the company and tax-exempt for employees.

These plans are valuable and simple to set up!

As a Certified Cafeteria Plan Administrator, The Payroll Factory will ensure you are always compliant and reach maximum savings every year!?

In addition to applying the pre-tax saving plans to your payroll, we will also—

  • Create custom IRS required Section 125 Plan Document and Written Plan Document
  • Supply annual renewal packets
  • 100% Account Management- We’ll help you maximize adoption, engagement and account optimization.
  • Direct Employee Support

Contact us for a

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