My company is offering a Cafeteria Plan. What is does this mean and how does it affect me?

Is this something I am forced to accept?

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.

1. Accident and Death Benefit
2. Group Term Life Insurance
3. Dependent Care Program
4. 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.

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Ask TaxGuru Please refer to the legal disclaimer.

A cafeteria plan is a type of employee benefit plan.Employees of employers with cafeteria plans may obtain such benefits as health insurance, group-term life insurance, and flexible spending accounts through the plan. Though some cafeteria plans offer an explicit choice of cash or benefits, most today are operated through a salary reduction agreement.