What is a Premium Conversion Cafeteria Plan?
Section 125 of the Internal Revenue Code permits employers to sponsor a plan that enables their employees to pay premiums for certain types of benefits on a pre-tax basis. Section 125 also permits employers to sponsor health and dependent care flexible spending account plans. These types of plans are referred to as “cafeteria plans.” A plan that does not offer flexible spending accounts is often referred to as a “premium conversion,” “premium only,” or “POP” cafeteria plan.
