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Cafeteria Plan

What is a Cafeteria Plan?

A special plan established by employers for employees, designed to comply with Section 125 of the Internal Revenue Code. This plan enables participants to receive select benefits before taxes are deducted. It ensures participants can choose between at least one taxable benefit (like cash) and one qualified benefit.

Key Points:

  • Cafeteria plans are employer-sponsored arrangements adhering to IRS guidelines.
  • They allow employees to opt for specific benefits with pre-tax dollars, reducing taxable income.
  • A cafeteria plan typically offers a mix of taxable and qualified benefits, catering to individual preferences and needs.

 

References

“Glossary.” HealthCare.gov, www.healthcare.gov/glossary/.

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