Cost and Coverage: The Impact of Implementing Various State Health Care Reform Proposals Nationally. Mandatory Section 125 Plans


Section 125 plans (sometimes referred to as cafeteria plans), so named after Section 125 of the Internal Revenue Code enacted by Congress in 1978, are benefit plans offered by employers to their employees that allow employees to pay for certain benefits on a pre-tax basis.  When employers offer health insurance through a Section 125 plan, employees can pay for their share of the premium with pre-tax dollars which reduces their taxable earnings.  This affords a significant cost savings, making coverage more affordable and encouraging individuals to purchase health insurance.

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