Cafeteria Plans (tax advantage of fringe benefits) (column)

Article Abstract:

Under Section 125 of the Internal Revenue Code, non-taxable fringe benefits offered through cafeteria plans are exempt from Federal Insurance withholdings, federal and most state income taxes. They are also free from unemployment and disability taxes. Employees under the cafeteria plan can choose between taxable and nontaxable benefits. Taxable benefits under the plan include: cash, term life insurance that exceeds $50,000, and legal service insurance. Nontaxable benefits include scholarships, tuition reimbursement, and meals and housing costs.

Analysis, Tax accounting, column

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More on cafeteria plans

Article Abstract:

The Internal Revenue Code Section 125 describes the requirements for cafeteria- style flexible benefits plans. Section 125 requires that cafeteria plans include: complete listings of the available benefits and their coverage periods; detailed eligibility rules; and comprehensive procedures controlling participants' benefit elections. Additionally, cafeteria plans are required to pass tests to determine if they contain discrimination in favor of particular groups or highly compensated executives.

Cafeteria benefit plans

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