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
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