Short answer: A cafeteria plan, also called a Section 125 plan, is the tax-advantaged structure; an FSA is a benefit that can be offered within that structure; and a POP is a limited type of Section 125 plan that only allows pre-tax insurance premium deductions.
These terms are closely related but are not interchangeable. They describe different layers of how pre-tax benefits are structured and offered.
A cafeteria plan is the formal legal arrangement that allows employees to choose among certain benefits and pay for them on a pre-tax basis. The term Section 125 plan refers to the same concept and comes from the section of the Internal Revenue Code that authorizes this tax treatment. When employers refer to a Section 125 plan, they are referring to a cafeteria plan.
A Flexible Spending Account (FSA) is a type of benefit that can be offered within a cafeteria plan. FSAs allow employees to set aside pre-tax dollars to pay for eligible health care or dependent care expenses. The FSA itself is the benefit, while the cafeteria or Section 125 plan is the legal structure that makes the tax savings possible.
A Premium Only Plan (POP) is a simplified version of a cafeteria plan. A POP allows employees to pay their share of health insurance premiums on a pre-tax basis but does not include FSAs or other optional benefits. It is often used by employers that want pre-tax premium deductions without offering a broader menu of benefits.
In short, the cafeteria or Section 125 plan is the tax-advantaged framework, an FSA is one type of benefit that can be offered within that framework, and a POP is a limited cafeteria plan focused solely on pre-tax premium payments.
Sources
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Internal Revenue Code, Section 125
Content history
Originally published: March 27, 2025
Last reviewed: January 25, 2026