Here is a question worth asking your HR team today: do we have a written Section 125 plan document, and when was it last updated?
A surprising number of employers cannot answer it.
Why this applies to you
If your employees pay their share of health premiums through pre-tax payroll deductions, you are running a cafeteria plan under Section 125 of the Internal Revenue Code. That is what makes the pre-tax treatment work.
It is not an optional program you signed up for. It is a characterization of what you are already doing, and it comes with a requirement.
The requirement
The IRS is direct about it:
The written plan must specifically describe all benefits and establish rules for eligibility and elections.
A written plan. Describing all benefits. With eligibility and election rules.
Not a paragraph in the handbook. Not an understanding with your payroll provider. A plan document.
Why nobody notices
Because nothing depends on it until something does. Payroll runs. Deductions come out pre-tax. Employees are happy. There is no annual filing that asks whether the document exists.
It surfaces during an audit, during due diligence when the company is being acquired, or when an employee disputes a mid-year election change and there is no plan language to point at.
At that point the document you did not have for six years is a problem you cannot retroactively solve.
What we cannot tell you here
The IRS FAQ that states the written plan requirement does not spell out the specific tax consequences of not having one, and we are not going to invent them. The exposure runs to the pre-tax treatment of the elections, which is not a small thing when you multiply it by every employee and every year.
If you do not have a document, the right next call is to your benefits counsel or your administrator, not to a blog post.
What to check
- Does a written Section 125 plan document exist?
- Does it describe the benefits you actually offer today, or the ones you offered when it was drafted?
- Does it reflect your current eligibility rules and waiting periods?
- Has it been amended for plan changes since it was written?
A document that describes a plan you no longer run is closer to no document than to a current one.
Source: IRS, FAQs for Government Entities Regarding Cafeteria Plans
Verified against primary sources in August 2026. Deadlines and thresholds change — confirm against current IRS and DOL guidance, or call us at (920) 243-4006 and we will check it with you.
This is the work we do.
Benefi administers group benefit plans for employers — including the deadlines above. If you are not certain where your plan stands, that is a short conversation, not a project.