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    Cafeteria Plans

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

    Please answer questions and provide supporting resources.

    © BrainMass Inc. brainmass.com June 4, 2020, 3:53 am ad1c9bdddf
    https://brainmass.com/business/accounting/cafeteria-plans-540676

    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.

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