A Cafeteria Plan (includes Premium Only Plans and Flexible Spending Accounts) is an employee benefits program designed to take advantage of Section 125 of the Internal Revenue Code. A Cafeteria Plan allows employees to pay certain qualified expenses (such as health insurance premiums) on a pre-tax basis, thereby reducing their total taxable income and increasing their spendable/take-home income. Funds set aside in Flexible Spending Accounts (FSAs) are not subject to federal, state, or Social Security taxes. On average, employees save from $.25 to $.49 for EVERY dollar they contribute to the FSA
Qualified Benefits
A cafeteria plan, as defined in Section 125 of the Internal Revenue Code, is a plan in which all participants are employees who choose from a minimum of two or more benefits that consist of cash and qualified benefits. Those benefits include:
- Accident and Health Plans
- Dependent Care Assistance Programs
- Group Term-Life Insurance
- Short-Term or Long-Term Disability Coverage
- Health Savings Accounts
- Elective Contributions to a Section 401(k) Plan
- Elective Vacation Days
- Cash
- Flexible Spending Accounts
- Adoption Assistance
