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Cafeteria Plans

What is a cafeteria plan?

A cafeteria plan, also known as a section 125 plan, is a written plan that offers employees a choice between receiving their compensation in cash or as part of an employee benefit. If taken as a benefit, the employee generally receives 2 tax advantages:

  1. Employee contributions toward cafeteria plan benefits are made pre-tax.
  2. Employer contributions toward an employee’s cafeteria plan benefits are not taxed.

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