Cafeteria Plan Definition

A cafeteria is an employee benefits program that allows for Section 125 pre-tax deductions from payroll per the Internal Revenue Code. The advantage of a cafeteria plan is to reduce taxable wages, therefore reducing taxes.

Cafeteria Plan Extended Definition
Cafeteria plans let participants receive qualified benefits on a pre-tax basis, lowering their taxable income. It gives employees a choice between cash or taxable benefits.

Qualified benefits under a cafeteria plan include:

Accident and health benefits
Adoption assistance
Dependent care assistance
Group-term life insurance
HSAs

Keep in mind that cafeteria plans typically don’t include plans that offer a benefit that defers pay. Benefits not allowed under a cafeteria plan include Archer MSAs, educational assistance, employee discounts, and transportation benefits.

Last Updated By

Rachel Blakely-Gray | Feb 15, 2023

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