What are Cafeteria Plans?
Cafeteria Plan's are generally "employer sponsored benefit packages" that offer employees a choice of accepting cash or receiving qualified benefits.
These qualified benefits would include any of the following that are currently allowable under IRS Code Sec 125.
- Accident and Death Benefit
- Group Term Life Insurance
- Dependent Care Program
- Group Disability Program
Per the IRS code section, "no amount is to included in the income of a cafeteria plan participant who chooses to participate in the benefits of the plan."
However, if a participant prefers to receive the cash option, then the IRS rules require that this cash (that is paid) is to be included in the gross income as part of the W-2 Compensation.