Section 125 Plan Options
1. Premium Only Plans (POP)
Simple. Affordable. Fast to set up.
POP Plans are the entry point into Section 125 savings and the most widely used option among small to midsize employers.
A Premium Only Plan (POP) allows employees to pay for their insurance premiums—such as medical, dental, and vision—with pre-tax dollars. That reduces their taxable income and lowers your payroll tax liability with every paycheck.
Highlights:
Covers health, dental, vision, and some supplemental plans
Saves employers 7.65% in FICA payroll taxes
Employees take home more without a raise
Quick setup with minimal ongoing admin
Best for: Small businesses, startups, or any company just starting with Section 125 tax-saving strategies.
👉 Learn more: POP Plan Details →
2. Full Cafeteria Plans
More benefits. More savings. More flexibility.
A Full Cafeteria Plan expands on the basic POP Plan and opens the door to a wide range of pre-tax benefit options, including FSAs, Dependent Care Accounts, and add-ons like telemedicine or identity protection.
With a full plan, employees get to choose the benefits that best fit their lifestyle, and employers benefit from deeper tax savings through additional pre-tax deductions.
Highlights:
Includes all POP Plan features
Adds FSAs and Dependent Care FSAs
Supports add-on wellness and lifestyle perks
Higher employee satisfaction and retention
Best for: Companies with diverse employee needs or teams looking to offer competitive, customizable benefits.
👉 Explore: Full Cafeteria Plan Features →
3. FSA + Dependent Care FSAs (DCAP)
Put more money back in your team’s pockets.
Want to help your employees stretch their paychecks even further? Adding Flexible Spending Accounts (FSAs) and Dependent Care FSAs (DCAP) gives them a way to save big on out-of-pocket healthcare and childcare expenses—all tax-free.
These accounts allow employees to contribute pre-tax income toward qualifying expenses, while you, the employer, save on payroll taxes at the same time.
Highlights:
FSAs: Cover co-pays, deductibles, prescriptions, and more
DCAP: Offset daycare, preschool, and after-school care costs
Annual contribution limits guided by IRS rules
Great value for families and high-deductible plan users
Best for: Employers with working parents, family-oriented workforces, or anyone offering high-deductible insurance plans.
👉 Dive into the details: FSA + DCAP Plan Info →
4. Bundled Add-On Packages
Boost your benefits package with modern perks.
Looking to offer more than just insurance and FSAs? Our Bundled Add-On Packages let you extend your Section 125 Plan with trending, value-driven benefits your team will actually use—without triggering extra taxes.
These bundles are fully pre-tax eligible when structured correctly and can be offered with no extra cost to the employee or with employee contributions.
Popular add-ons include:
24/7 Telemedicine access
Identity theft protection
Wholesale travel club membership
Pet care and veterinary telehealth
Legal and financial wellness tools
Best for: Companies that want to improve morale, increase retention, and offer modern benefits that meet real-life employee needs.
👉 See options: Explore Add-On Packages →
5. Section 132 (Commuter + Parking Benefits)
Tax-free help with getting to work.
Section 132 isn’t technically part of Section 125—but it works alongside it beautifully. It allows employees to pay for commuter transit passes and parking with pre-tax income. That means lower taxable income, higher take-home pay, and lower FICA costs for you.
If your workforce includes hybrid teams, city commuters, or essential workers, this add-on is especially helpful.
Highlights:
Covers transit passes, subway/bus fares, and parking
Employees save up to $300+/month tax-free (based on IRS limits)
Compliant when set up with proper documentation
Simple to integrate into payroll systems
Best for: Urban businesses, hybrid teams, and environmentally conscious employers.
👉 Learn more: Commuter Benefit Details →
Ready to Build Your Custom Section 125 Plan?
With 125Plans.com, setting up your plan is simple, fast, and fully compliant. You’ll get:
A clear explanation of each plan option
Help choosing the right setup for your company
IRS-compliant documents and onboarding support
Payroll integration and employee enrollment assistance
Ongoing compliance management
Let’s turn your payroll into a savings engine—for both you and your employees.
Disclaimer: Section 125 Solutions LLC does not provide legal or tax advice. We connect employers to third-party administrators qualified to manage compliant Section 125 Cafeteria Plans.
Start With a Free Consultation and Savings Estimate
Not sure where to begin Start with a free consultation that shows you exactly how much you could save Our quick tools make it easy to compare options estimate tax breaks and find a plan that fits your team and your goals.
Use our free tools to:
Compare plan options side by side
Estimate your annual tax savings
Choose a plan that fits your company today and scales with your growth
Try our Saving Calculator now!
📣Calculator Disclaimer: Calculations are for informational purposes only and do not guarantee specific savings. Actual savings will vary based on your setup.
Book Your Consultation
Explore how Section 125 plans could save your business over $1,000 per W-2 employee each year. Book a free consultation to see how much you could be losing by not having one.
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