A cafeteria plan, also known as a flexible benefits plan or Section 125 plan, is an employee benefit plan offered in the United States pursuant to Section 125 of the Internal Revenue Code. The name comes from the earliest such plans that allowed employees to choose between different types of benefits, similar to the ability of a customer to choose among available items in a cafeteria. Qualified cafeteria plans are excluded from gross income and must allow employees to choose from two or more benefits consisting of cash or qualified benefit plans. Employees of employers with cafeteria plans may obtain such benefits as health insurance, group-term life insurance, voluntary "supplemental" insurance (dental, vision, cancer, hospital confinement, accident, etc.), and flexible spending accounts through the plan.
A cafeteria plan is a separate written plan maintained by an employer for employees that meets the specific requirements and regulations of Section 125 of the Internal Revenue Code. It provides participants an opportunity to receive certain benefits on a pretax basis. Participants in a cafeteria plan must be permitted to choose among at least one taxable benefit (such as cash) and one qualified benefit.
In summary, a cafeteria plan is an employee benefit plan that allows staff to choose from a variety of pre-tax benefits, including health insurance, group-term life insurance, voluntary "supplemental" insurance, and flexible spending accounts. It is a separate written plan maintained by an employer for employees that meets the specific requirements and regulations of Section 125 of the Internal Revenue Code.
