Cafeteria Plan

What is Cafeteria Plan?

A cafeteria plan is an employer-sponsored benefits programme that allows employees to choose from a menu of pre-tax benefit options according to their individual needs. Governed by Section 125 of the Internal Revenue Code, cafeteria plans may include health insurance, dental and vision coverage, flexible spending accounts, dependent care assistance, and life insurance. Employees allocate a portion of their gross salary to pay for selected benefits before taxes are calculated, reducing their taxable income. Cafeteria plans offer flexibility for employees while helping employers manage benefits costs.