Cafeteria plans increase employee take home pay at no expense to the employer.
As a tax saving device, both employers and employees may enjoy significant tax savings. Cafeteria plans, also known as flexible benefit or Section 125 plans, give employees the opportunity to customize their benefit package to meet their particular needs, individual choices are particularly valuable. Cafeteria plans are specially authorized by Section 125 of the Internal Revenue Code. An employer may also make contributions to the plan on behalf of its employees. Employee participation in a cafeteria plan also reduces the employment taxes paid by an employer.