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Made possible by section 125 of the IRS code, these plans offer employers a way to save taxes on their group benefit plans and offer employees a way to save taxes on money spent out-of-pocket for dependent care and medical expenses.
Three types of Section 125 plans exist: Premium Only, Flexibly Spending Accounts and Full Cafeteria Plan. Money allocated to a Section 125 Plan is subtracted from the employee’s taxable income. It is also free from employer-paid Social Security and Unemployment taxes.
Benefit plans may include: