Cafeteria Plan

What Does Cafeteria Plan Mean?

A cafeteria plan is a type of employee benefit that allows employers to permit a certain percentage of an employee’s pre-tax earnings to be allocated into a special account. Employees can then use this account to cover expenses such as life insurance premiums or medical costs that are not covered by insurance.

Insuranceopedia Explains Cafeteria Plan

Cafeteria plans offer employees flexibility in choosing how to utilize their benefits. Unlike more restrictive group benefit plans, these plans allow for a degree of customization based on individual preferences.

Another advantage of cafeteria plans is that they can reduce the taxable income reported by the business for each employee, potentially lowering the employer’s overall tax burden.