Internal Revenue Code 125 allows an employer to implement an employee benefit plan which allows employees to se1ect the benefit programs they prefer.
The plan offers two or more options and the employee chooses the option most appropriate for him or her. Because of the "menu" of benefits available, the plan is referred to as a "Cafeteria Plan".
Cafeteria Plans, along with 401(k)'s, are among the most popular employee benefit plans of the past decade. The tax benefits to the employer and employees far exceed the minimal required government reporting.