Cafeteria Plans

A cafeteria plan is a type of employee benefit plan offered in the United States pursuant to Section 125 of the Internal Revenue Code. Cafeteria plans allow employees to choose between different types of benefits, similar to choosing items in a cafeteria. 

A cafeteria plan is also referred to as a flexible benefits plan or Section 125 plan. It's a great option for employee benefits plans because of its flexibility.

• Flexible spending plan / flexible spending accounts (FSA)
• Unreimbursed medical and dependent care expenses
• Accidental death and dismemberment coverage
• Disability coverage and vacation leave
• Group life insurance less than $50,000 ( amounts in excess of $50,000 continue to be taxable)
• Other normally accepted Cafeteria Plan services as accepted by the IRS

Contributions to a cafeteria plan are made pre-tax. Section 125 of the Internal Revenue Code (IRC) specifies that cafeteria plans are exempt from the calculation of gross income for federal income tax purposes. No federal or Social Security taxes will be deducted.

Please note that for some benefits, such as group life insurance benefits that exceed $50,000 or adoption assistance benefits, will still require employers to withhold both Social Security and Medicare taxes.

• Childcare services
• Chiropractic care
• Contact lenses
• Co-pays and deductibles
• Drugs/medicines (prescribed)
• Eye examinations/vision expenses
• Hearing aids/batteries/repairs
• Orthodontia
• Physical therapy
• Psychiatric care
• Screening tests
• Surgery