These terms are related, but they’re not interchangeable. Here’s how they break down:
Cafeteria Plan (also called a Section 125 plan)
This is the legal structure that allows employees to choose between different types of benefits—like health insurance, FSAs, and dental coverage—without being taxed on the money they spend.
The term “Section 125 plan” is just another name for a cafeteria plan, named after the section of the IRS code that governs it.
FSA (Flexible Spending Account)
An FSA is one type of benefit that can be offered within a cafeteria plan.
It allows employees to set aside pre-tax dollars to pay for eligible healthcare or dependent care expenses. The FSA is the benefit, while the cafeteria plan is the structure that makes it tax-free.
POP (Premium Only Plan)
A POP is a simple type of Section 125 plan that allows employees to pay their share of insurance premiums pre-tax—but doesn’t include FSAs or other benefits.
Think of it as a basic cafeteria plan with just one option on the menu: pre-tax premium deductions.
Summary:
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A Section 125 plan / cafeteria plan is the tax-advantaged framework.
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An FSA is a benefit that can be offered within that framework.
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A POP is the most limited version of a cafeteria plan, used only for pre-tax premiums.