• Cafe 125 is a designation frequently included next to a dollar amount in Box 14 of an employee's W2 form. It is short for cafeteria plan, the name commonly used to refer to plan authorized by Section 125 of the IRS Tax Code.


    A cafeteria or section 125 plan is a plan by employer that allows qualified participants to receive pretax benefits. The total on the W2 reports the amount an employee elected not to receive as wages, but instead chose to use before taxation to pay for a benefit.


    A written cafeteria plan must be maintained by the employer. Employees must be offered a choice between a taxable benefit and the cafeteria plan.


    Common cafeteria plans include accident and health benefits, health savings accounts, child care assistance, group term-life insurance and adoption assistance.


    In addition to employees, former employees and spouse and dependents of employees can participate in section 125 plans.


    Any amount labeled as cafe 125 plan on W2 is not considered taxable and is not reported on tax return. It is included on W2 for informational purposes only.

    Source: What is a cafeteria plan?

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