Cafeteria Plan

By Entrepreneur Staff

Pencil

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.

Cafeteria plans, also known as Section 125 plans (because of the section of the IRS code that covers them), and flexible spending plans allow employees to use pretax dollars to choose among different types of benefits. Cafeteria plans typically have core benefits such as medical and life insurance, sick leave and sometimes disability benefits. Option benefits may include anything from dental insurance and elder care to vision coverage. They can't, however, include transportation assistance, tuition assistance or, unless part of a 401(k) plan, retirement benefits.

More from Employee Benefits

Cafeteria Plan

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.

See full definition

Compensation

In financial terms, the salary and wages you pay to your employees for the work they do. Other, nonfinancial forms of compensation can also be offered to attract and retain staff.

See full definition

Benefits

A product or service's customer-oriented strengths; statements of a valuable product or service feature, with an emphasis on what the customer gets from the products

See full definition

Bonus

A monetary payment made to an employee over and above their standard salary or compensation package

See full definition

Latest Articles

Science & Technology

5 Rule-Bending AI Hacks to Make Your Mornings More Productive and Profitable

By 2025, AI will transform productivity by streamlining workflows and cutting costs. Major companies like Microsoft, Google, and OpenAI are leading the way, advancing AI into "Phase 3," where tools act as digital assistants. Discover 5 AI hacks to boost efficiency and redefine your daily routine.

Marketing

5 Critical Mistakes to Avoid When Giving a Presentation

Are you tired of enduring dull presentations? Over the years, I have compiled a list of common presentation mistakes and how to avoid them. Here are my top five tips.