What Is a Cafeteria Fund

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. … Employer contributions toward an employee’s cafeteria-plan benefits are not taxed.

What is cafeteria money?

A cafeteria plan is an employee benefit plan that allows staff to choose from a variety of pre-tax benefits. Employees can contribute a portion of their gross income before any taxes are calculated and deducted.

How does cafeteria plan work?

How does a cafeteria plan work? Employer contributions to the cafeteria plan are usually made pursuant to salary reduction agreements between the employer and the employee in which the employee agrees to contribute a portion of his or her salary on a pre-tax basis to pay for the qualified benefits.