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Tax-Advantaged Benefits

You may consider establishing tax savings arrangements such as Section 125 Cafeteria Plans and Section 105 Plans for your employees as options to manage healthcare costs.  Employers with employees who are subject to U.S. income taxes are eligible to sponsor these plans. Many employers are turning to tax-advantaged medical reimbursement accounts as a cost-saving strategy.

A Section 125 plan provides employees an opportunity to pay for certain benefits on a pre-tax basis, allowing them to increase their net pay.  The name "cafeteria plan" comes from an employer's ability to offer employees several benefit options.  The plan also allows employers to make nontaxable contributions for their employees. Qualified benefits may include:

  • Group health plans

  • Vision and dental plans

  • Disability and life insurance

  • Health flexible spending accounts (FSAs)

  • Dependent care assistance programs (DCAPs)

  • Health savings account (HSAs)

Section 105 Plans enable employers to provide employees tax-free reimbursements for qualified medical and health insurance expenses. Employers reimburse employees and their dependents for their out-of-pocket medical costs and health insurance premiums under an employer-sponsored health plan with these plans.  Section 105 Plans may include:

  • Self-Funded (Self-Insured) Health Plans

  • Health Reimbursement Arrangements (HRAs)

  • Medical Expense Reimbursement Plan (MERP)

You can also offer your employees pre-tax commuter benefits that enable them to use pre-tax dollars to pay for their commute and save on taxes. The IRS allows employees to set aside pre-tax pay to cover transit and parking costs.  

At Diversified Brokerage, we can help you customize your cost-saving strategies for you and your employees.

Tax-Advantaged Benefits: About
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