Cafeteria Plans are available to business owners and their employees for the purpose of funding employee benefits with pre-tax dollars.

The essence of a cafeteria plan, as described in IRC Section 125, is that it allows each participating employee to choose among two or more benefits. In particular, the employee may purchase "nontaxable benefits" by foregoing taxable cash compensation. Benefits under a cafeteria plan are limited to cash and certain statutory benefits, including medical, disability and other accidental or health plan coverage, group term life insurance, dependent care, group legal services, and 401(k) plans.

There are many different methods of initializing cafeteria plans for small businesses. Each company is different, and cafeteria plans should be approached with that idea in mind.

Additional Information on Group Health Insurance

Comprehensive Major Medical Plan
Health Maintenance Organizations (HMOs)
Preferred Provider Organizations (PPO's)
Self Funded Plan
Cafeteria Plan
Conclusion

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