Flexible Benefits/ Cafeteria Plans
What are flexible benefits? Flexible benefit plans, or cafeteria plans, generally allow employees to choose
between cash compensation, tax-exempt benefits, and taxable benefits
without the choice itself resulting in the inclusion of the tax-exempt
benefits in taxable income. Flex or cafeteria plans are authorized
by Internal Revenue Code (IRC Sec. 125) and are often referred to as Section 125 plans. These plans enable employers
to provide employees with an additional benefit package at virtually
no extra cost while reducing both the employer's and the employees'
tax bills. Flex plans allow employers to upgrade and customize the
array of benefits offered while keeping a handle on total benefit
costs. Flex plans range from the most simple (that merely pay group
insurance premiums with pretax dollars) to the most complex (that
provide benefit credits and a choice of types and levels of benefits
that may be chosen and paid for on either a pretax or post-tax basis).
Summary for [Your State]