Cafeteria (Section 125) Plan - Physician Contract Glossary
Cafeteria (Section 125) Plan
Definition
A pre-tax benefit program allowing you to pay insurance premiums, healthcare costs, or dependent care expenses with before-tax dollars.
Examples in Context
“Physician may elect to pay family health premiums through the Section 125 plan.”
“Eligible expenses under the Section 125 plan include medical, dental, and vision coverage as defined by IRS regulations.”
Implications for Physicians
- Reduces taxable income, potentially saving thousands annually.
- Provides flexibility in covering healthcare or childcare expenses.
- Requires careful planning to avoid forfeiting unused funds.
Negotiation Tips
- Ask if your employer contributes matching funds to your plan.
- Confirm which expenses qualify (e.g., medical, dental, childcare).
- Check if unused funds can carry over to the following year.
Red Flags and Pitfalls
- “Use-it-or-lose-it” rules for certain Flexible Spending Accounts (FSAs) may result in forfeited funds.
- Mid-year election changes are usually restricted unless due to qualifying life events.
Related Terms
FAQs
- “What expenses are covered under a Section 125 Plan?”
- Eligible expenses typically include insurance premiums, medical co-pays, prescription costs, and dependent care expenses.
- “Can I change my contributions anytime?”
- Typically, you can only adjust your contributions during open enrollment or after a qualifying life event such as marriage or childbirth.
- “Are there annual contribution limits?”
- Yes, the IRS sets annual limits for FSAs and dependent care accounts.
Legal Disclaimer
The information provided in this glossary is for educational and informational purposes only and should not be construed as legal advice. While we strive to provide accurate and up-to-date information, this content is intended to help physicians better understand common contract terms and does not replace professional legal guidance.
For personalized advice regarding your employment contract or other legal concerns, we strongly recommend consulting with a qualified attorney who specializes in physician employment contracts.
You can find experienced legal professionals through our Physician Contract Lawyer Directory.