Cafeteria plans are flexible benefit plans that can be used to accommodate the variety in today’s lifestyles and family relationships, as well as to help employers control overall employee benefit costs by including salary reduction provisions under which employees may be able to purchase benefits with pre-tax dollars.
Cafeteria plans allow employees to select among two or more benefits consisting of cash and “qualified benefits.” While cash benefits are included in the employee’s gross income, qualified benefits are excluded from gross income and can include such benefits as:
- Accident and health insurance
- Retirement benefits
- Group term life insurance (up to certain limits)
- Dependent care assistance