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The cafeteria plan definition is a flexible employee benefit plan that allows employees to choose from a selection of fringe benefits. In a cafeteria, the customer chooses components of a meal from a selection of food items. Furthermore, in a cafeteria employee benefit plan, the same concept applies to selecting employee benefits from a menu of options. There are typically terms and limitations to a cafeteria employee benefit plan. The IRS Code Section 125 describes this plan.
Let’s look at cafeteria plan advantages! One key advantage of the cafeteria plan is the potential for tax savings. According to IRS Code Section 125, a cafeteria plan allows employees to choose certain pretax benefits. Furthermore, these are benefits excluded from the employee’s gross income. Another advantage is that it allows employees to select a package of fringe benefits based on what is most important to them, rather than having the benefits plan dictated to them by their employer.
If you want a list of FAQs regarding IRS Code Section 125 Cafeteria Plans, then go to: www.irs.gov