What qualifies as a section 125 cafeteria plan?

A Section 125 Cafeteria Plan is an employer-sponsored benefits plan that lets employees pay for certain qualified medical expenses – such as health insurance premiums – on a pre-tax basis. Typically, they can use the pre-tax money to pay for health insurance premiums, retirement deposits, or other benefit options.

What are the IRS Qualifying events?

What is considered a qualifying life event (QLE)?

Losing health insurance for any reason except not paying premiums.
Losing eligibility (Medicaid, Medicare or a Children’s Health Insurance Program)
Turning 26 and losing coverage through a parent’s plan.
Loss of job-based coverage (quit or fired)

What are qualified benefits under section 125?

In a section 125 plan or cafeteria plan, employees can pay qualified medical, dental, or dependent-care expenses on a pretax basis, which has the effect of reducing their taxable income as well as their employer’s Social Security (FICA) liability, federal income and unemployment taxes, and state unemployment taxes …

What are qualified benefits under cafeteria plan?

Qualified benefits under a cafeteria plan are generally employer‐provided benefits that are not includable in gross income. Examples include employer‐provided health insurance coverage, group term life insurance coverage not in excess of $50,000, and benefits under a dependent care assistance program.

Who is not eligible for cafeteria plan?

Employers can be C corporations, S corporations, LLCs, partnerships, governmental entities or sole proprietorships. However, nonemployees cannot participate in a cafeteria plan; this exclusion applies to partners in a partnership, members of an LLC and individuals who own more than 2 percent of an S corporation.

Who Cannot participate in a cafeteria plan?

Unlike the other business types, spouses, children, parents, and grandparents of more-than-2% shareholders may NOT participate in the cafeteria plan. Like partners in a partnership, more-than-2% shareholders may be able to make a tax deduction outside the cafeteria plan for medical and long-term care expenses.

Can I claim Cafe 125 deduction?

No. 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. Because the money used for this plan is not being taxed (pre-tax), then no deduction is allowed for the expense.