What does cafeteria mean on my W-2?
Under a cafeteria, or Section 125, plan, you pay for your employer-sponsored benefits with pretax money. Your employer deducts your payments from your wages before withholding certain taxes. Your employer doesn’t include your pretax payments in your taxable wages on your annual W-2.
What is Cafe 125 on tax return?
Cafe 125 on a W-2 tax form refers to a cafeteria plan, in which an employer offers workers a choice between various job benefits. These benefits can include medical insurance, life insurance, adoption assistance, assistance with care for dependent elderly relatives, extra paid vacation days and similar.
What does less Cafe 125 mean on W-2?
SECTION 125 is your employer’s benefit plan. It is also known as a “cafeteria plan”. Usually, what is reported there is your medical insurance premiums that are paid with pre-tax income. They are not taxed and are not included in your W-2 Box 1 wages so you can not deduct them as medical expenses.
What is cafeteria Paystub?
A “Cafeteria Plan” (see Section 125 of the IRS Code) is a benefit provided by an employer which allows an employee to contribute a certain amount of his or her gross income to a designated “account” before taxes are calculated. Utilizing a Cafeteria Plan correctly should result in an increased net paycheck.
Is health insurance a section 125?
It’s important to note that a Section 125 Cafeteria Plan does not provide health insurance. Instead, it allows employees to use pre-tax money to choose and pay for the types of insurance coverages that are most meaningful to them.
Is a Simple IRA considered a 125 cafeteria plan?
In Pub 560 from IRS, in the general section it says 125 contributions should be included. However in the SIMPLE IRA section of 560, it does not include Section 125 contributions.
What does 125 mean on w2?
SEC 125 is your employer’s benefit plan. It is also known as a “cafeteria plan”. Usually, what is reported there is your medical insurance premiums that are paid with pre-tax income. They are not taxed and are not included in your W-2 Box 1 wages so you can not deduct them as medical expenses.
Are cafeteria plans taxable?
Generally, qualified benefits under a cafeteria plan are not subject to FICA, FUTA, Medicare tax, or income tax withholding. If an employee elects to receive cash instead of any qualified benefit, it is treated as wages subject to all employment taxes.
Is health insurance a cafeteria plan?
Cafeteria Plans are an employer-sponsored benefit that lets employees pay certain qualified medical expenses – such as health insurance premiums for medical, dental, and vision coverage – on a pre-tax basis. They are sometimes called Section 125 Cafeteria Plans.
What is the disadvantage of cafeteria style plans?
Employees who exceed their allocated spending amount pay a partial premium to their employer. So if Emma spends $1,000 over her allocated contribution, she pays a portion of that amount herself. The disadvantage of a cafeteria plan is it usually takes more time to administer and is typically more complex.
How does a cafeteria plan benefit employer?
Cafeteria Plans are an employer-sponsored benefit that lets employees pay certain qualified medical expenses – such as health insurance premiums for medical, dental, and vision coverage – on a pre-tax basis.
Is 401k part of section 125?
A 401(k) cafeteria plan allows employees who are participating in their employer’s 401(k) plan to also choose additional types of benefits from a smorgasbord of options on a pretax basis. These plans are sometimes referred to as Section 125 Plan (from the applicable IRS code) or a flexible benefits plan.