For example, a young employee with several small children may be interested in dental insurance for his family. He is not really interested in or motivated by a pension plan at this time in his life. Another employee in this same company is in her late forties, has no dependent children and is planning for retirement. To force the same benefit on these two employees is not an effective use of benefit money. To allow some choice on the part of participants is a major advantage of the cafeteria approach to benefit planning.
Small businesses face difficult challenges when they try to match benefits with big firms.
Nevertheless, the small firm can enjoy the benefits of greater flexibility and innovativeness by offering a cafeteria plan.