See Also:
Employee Stock Ownership Plan
Evaluating and Renewing Employee Health Insurance Plan
Insulate Your Company from Rising Health Insurance Costs
How to Hire New Employees
How to Run an Effective MeetingCafeteria Plan DefinitionA cafeteria plan is a flexible employee benefit plan that allows employees to choose from a selection of fringe benefits. In a cafeteria, the customer chooses components of a meal from a selection of food items; in a cafeteria employee benefit plan, the same concept applies to selecting employee benefits from a menu of options. There are typically terms and limitations to a cafeteria employee benefit plan. The cafeteria plan is described in IRS Code Section 125.
Cafeteria Plan Advantages One key advantage of the cafeteria plan is the potential for tax savings. According to IRS Code Section 125, a cafeteria plan allows employees to choose certain pretax benefits – benefits that are excluded from the employee’s gross income. Another advantage of the cafeteria plan is that it allows employees to select a package of fringe benefits based on what is most important to them, rather than having the benefits plan dictated to them by their employer.
Cafeteria Plan Features A cafeteria plan gives the employee the option of selecting between taxable and non-taxable fringe benefits. Examples of benefits that may be offered in a cafeteria plan include health insurance, adoption assistance, dependent care assistance, group-term life insurance, health savings accounts, pretax retirement account contributions, stock options, cash, and vacation time.
IRS Code Section 125For a list of FAQs regarding IRS Code Section 125 Cafeteria Plans, go to:
www.irs.gov