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What is a Section 125 Cafeteria Plan?

A cafeteria plan, often tied to an IRS Code 125 cafeteria plan, is a benefits structure that lets employees choose from a menu of benefit options. Think of it like walking into a cafeteria: you pick what works for you; health, dental, vision, etc., all in one structured program.

But here’s the distinction: in the Lumara Plan, we don’t stop there. We take that cafeteria concept and combine it with PCMP and SIMRP to make it more powerful than the average IRS Section 125 cafeteria health plan structure.

At Lumara Health, we package that idea into the Lumara Plan, which leverages Section 125 together with preventive and reimbursement layers so you get more benefits, more compliance, and no extra cost.

Who Can Benefit From a Section 125 Cafeteria Plan?

Whether you’re a business with 50 employees or an enterprise managing 5,000 W-2s, the cafeteria plan framework can work for you. The key is how it’s implemented.

  • Small & Mid-Sized Companies: With Lumara’s 30-45 day rollout and zero out-of-pocket cost, smaller teams can now access benefits that were previously limited to Fortune 500 budgets.

  • Large Organizations: For larger companies, this plan can enhance an already existing benefits structure and deliver significant annual savings (~$600-$1,100 per W2 employee).


This type of plan allows you to reduce healthcare claims, boost retention, and create a more family-friendly workplace, without increasing costs or touching existing group insurance.

Employees and Their Families

Employees are the ultimate beneficiaries of a well-designed Section IRS 125 cafeteria plans. They get access to high-value benefits with no changes to their take-home pay and coverage that truly supports their well-being:

  • 24/7 Virtual Care for all minor or chronic conditions

  • Mental Health & Counseling Services (including substance support)
  • In-person urgent care visits
  • Family & Dependent Coverage with 12 annual care visits included
  • Group Term Life, Critical Illness, and Disability insurance
  • Prescription coverage with $0 copays

  • Access to Mayo Clinic wellness tools and health dashboards


Every benefit is designed not just for the employee, but for their entire household, including spouses and dependents. This makes it easier for employees to care for their families without navigating a maze of claims, approvals, or out-of-pocket costs.

Benefits of Section 125 Cafeteria Plans for Employers and Employees

Here’s where it gets interesting. When the cafeteria 125 approach is done well, the gains stack on both sides.

For Employers:

  • No out-of-pocket cost to you
  • Save ~$600–$1,100/year per W2 employee with section 125 payroll tax savings.

  • Fast, automated rollout (30-45 days)
  • Reduced claims over time (we see average savings long term)
  • Stronger retention, better morale

For Employees:

  • Access to $0 copay telehealth and virtual care
  • Mental health counseling, EAP support
  • RX coverage without copays
  • Coverage for spouse and dependents
  • Wellness coaching, prevention tools, and dashboards

That’s the kind of package people look at and say, “I’m staying here.”

What expenses are covered?

When you offer a cafeteria plan under Section 125, the eligible expenses are often health-related. With Lumara’s implementation, these include:

  • Medical, dental & vision care
  • Prescription medications
  • Mental health sessions
  • Lab tests and diagnostics
  • Virtual care/telemedicine
  • Preventive screenings

  • Wellness services
  • Life insurance, disability, critical illness (as part of the added structure)


Employees get clarity; they know what’s covered without guesswork or surprise denials.

The process of getting set up

You don’t have to reinvent your HR workflow to set this up. With Lumara, we manage the roll‑out from A to Z:

  1. Evaluate your current benefits and team
  2. Customize the menu of benefits for your workforce
  3. Integrate with payroll and enrollment systems.

  4. Educate employees and launch.
  5. Provide ongoing management and compliance oversight.


We aim to have everything live in 30-45 days, with no cost to your organization and no extra burden on your team.

What Is Included in a Section 125 Plan?

In the Lumara Plan, what’s included under the cafeteria 125 framework is more robust than usual.

  • Preventive health care and virtual care
  • Mental health and substance support
  • Prescription drug access

  • Spouse and dependent inclusion

  • Life insurance, disability, critical illness

  • Wellness tools, dashboards, coaching
  • Full compliance, auditing, and administration

So while it’s a section 125 cafeteria plan, it’s built to go further, with PCMP and SIMRP layered in for stronger benefits, better outcomes, and better protection.

Why Section 125 Cafeteria Plans Should Be Core to Benefits?

Cafeteria 125 plans, when executed with intelligence, become a pillar of modern benefits. The Lumara Plan turns this into something that does more than “give options,” it delivers results. You get higher employee satisfaction, lower long-term claims, and a real tax-efficient structure, without forcing your team or HR through chaos. It’s built for scale, compliance, and simplicity. Now, it’s a time to see how a cafeteria 125 benefit can transform what your benefits look like, without changing your base insurance or adding cost.

Frequently Asked Questions

What are the benefits of the 125 cafeteria plan?

Flexibility in benefits, higher engagement, stronger uptake, and better alignment with employee needs.

Flexibility in benefits, higher engagement, stronger uptake, and better alignment with employee needs.

Flexibility in benefits, higher engagement, stronger uptake, and better alignment with employee needs.

Flexibility in benefits, higher engagement, stronger uptake, and better alignment with employee needs.