I personally haven’t come across that % limit, so you may need to talk to a tax advisor, as perhaps your state or locality has some limit different than the feds. Here’s what’s in the tax code: https://www.irs.gov/government-entities/federal-state-local-governments/faqs-for-government-entities-regarding-cafeteria-plans
And here’s our article on Section 125 Cafeteria plans. https://fitsmallbusiness.com/section-125-cafeteria-plan/ in plain business language.
Also consider this article from Investopedia, which focuses more on finance-based topics for reference:
If you’re looking to provide employees with a Section 125 Cafeteria plan, consider working with a Professional Employer Organization (PEO), or sign up for HR software, like Gusto. https://fitsmallbusiness.com/goto/gusto-benefits-overview/
Good luck to you!