Cafeteria plans, also known as Section 125 plans (because of thesection of the IRS code that covers them), and flexible spendingplans allow employees to use pretax dollars to choose amongdifferent types of benefits. Cafeteria plans typically have corebenefits such as medical and life insurance, sick leave andsometimes disability benefits. Option benefits may include anythingfrom dental insurance and elder care to vision coverage. Theycan’t, however, include transportation assistance, tuitionassistance or, unless part of a 401(k) plan, retirement benefits.
Cafeteria Plan
Definition:
An employee benefit arrangement allowed by IRS Code Section 125, under which employees are allowed to pay for certain employee benefits on a pre-tax rather than an after-tax basis.
