Cafeteria plan

From Wikipedia, the free encyclopedia

A cafeteria plan is a type of employee benefit plan offered in the United States pursuant to Section 125 of the Internal Revenue Code. Its name comes from the earliest such plans that allowed employees to choose between different types of benefits, similar to a cafeteria.

Employees of employers with cafeteria plans may obtain such benefits as health insurance, group-term life insurance, and flexible spending accounts through the plan. Though some cafeteria plans offer an explicit choice of cash or benefits, most today are operated through a "salary reduction agreement", which is a payroll deduction in all but name. Deductions under such agreements are often called pre-tax deductions; they are not subject to income tax, or in most cases FICA.