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Cafeteria Plans

How do Cafeteria Plans benefit employers? How do they benefit employees?

Please answer questions and provide supporting resources.

Solution Preview

The main benefit of a Cafeteria Plan for an employer is the tax savings that results. A Cafeteria Plan is most commonly called a Section 125 plan. When an employer starts a 125 plan, the employees can contribute a certain percentage of their pay pre-tax. Because it comes out pre-tax, the employee's taxable income is reduced by the amount of the contribution to the 125 plan. The employee therefore sees more net pay, due to ...

Solution Summary

This solution explains how cafeteria plans benefit employers and employees. A thorough discussion is provided.