Which Benefits Can Be Offered From A Cafeteria Plan
9/20/2025
Which Benefits Can Be Offered In A Cafeteria Plan
The following benefits are permitted in a Cafeteria Plan:
- The employee-paid share of premiums for employer-sponsored health plans
- The employee-paid share of premiums for employer-sponsored individual accident plans such as hospital indemnity policies owned by the employee
- The employee-paid share of premiums for employer-sponsored dental, vision, or prescription drug coverage
- Health Flexible Spending Arrangements (HFSAs). An HFSA allows employees to establish a "bank" of funds - using pre-tax dollars - that can be used to reimburse the employee for certain out of pocket expenses such as co-payments or plan deductibles
- Dependent Care Assistance Plans (often called DCAPs). A DCAP allows employees to establish a "bank" of funds - using pre-tax dollars - that can be used to reimburse the employee for qualified dependent care expenses
- Group term life insurance up to $50,000 in policy face value
- Short-term and long-term disability plans
- Paid vacation and paid time off (PTO) arrangements
- §401(k) plans
- Adoption assistance program(s)
- HSA contributions made by employees
There are also some benefits that are taxable, but that may still be offered as part of a Cafeteria Plan. The following benefits are treated as cash by the IRS, but may be offered through a Cafeteria Plan as long as they do not defer compensation and they are purchased with after-tax dollars. These include:
- Group term life insurance on the participant (employee) in excess of IRS limits
- Vacation (paid time-off) pay for unused vacation days (only in same plan year)
- Group auto insurance
- Disability insurance (after-tax premium)
- Cash compensation (in lieu of benefits)
The purpose of offering these benefits within a Cafeteria Plan is to provide the employee with a single benefits package.
Some of the benefits may be purchased with pre-tax dollars (qualified benefits) and some of the benefits may be purchased with after-tax dollars (taxable benefits).
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