Section 125 (Cafeteria Plans)

What is a Cafeteria Plan?

A cafeteria plan is an employee benefits plan which lets employees choose from a list of options, much like they might choose from a cafeteria menu. Hence the name, cafeteria plan. There are distinct advantages to cafeteria plans for both employees and employers, especially for small businesses.

Some common inclusions on the menu of a cafeteria plan are:

  • Health Insurance
  • Childcare Assistance
  • Life Insurance
  • Payments into Retirement Accounts
  • Adoption Assistance
  • Paid Leave
  • Assistance with Care for Injured or Disabled Family Members

Depending on an employee’s needs, he or she can choose from these options to construct the ideal benefits package. For example, a woman who is planning on having children in the near future might choose to put payments toward paid maternity leave, health insurance, and child care.