Section 125 Definition

A section of the Internal Revenue Code that allows an employer to offer benefits to employees on a pre-tax basis.

Section 125 Extended Definition
Also known as a cafeteria plan or flexible spending plan, a Section 125 plan is a benefits program offered by employers to give employees the option to pay certain expenses from their paychecks prior to the deduction of taxes.

Employers withhold a percentage of the pre-tax earnings of employees participating in the program and allocate it to selected expenses.

Related Article
Section 125 Plans: An Overview for Employers

Last Updated By

Rachel Blakely-Gray | May 01, 2023

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