Cafeteria plan
In accounting, cafeteria plan means a written plan that lets employees choose between cash and qualified benefits — health premiums, a health FSA, dependent care — so that what they choose is paid pre-tax: out of income-tax wages and out of FICA wages.
Also called Section 125 plan.
Authority: IRC §125; IRS Pub. 15-B. Sources
The lessons that teach this
From the free founder back-office course, taught on one company's books, with exercises to work it yourself.
- BenefitsSection 125: pre-tax health premiumsEmployer premiums are excluded from income under §106; a section 125 plan takes the employee's share out of income tax, FICA and FUTA — Northwind's October payroll, worked.10 min
- BenefitsHSAs and FSAs for employersHealth savings accounts, the HDHPs that unlock them, and health FSAs — with every 2026 limit and the One Big Beautiful Bill's HSA changes.10 min
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
What it is not called
Each of these means something else. Use one here and an accountant reading the product notices.
- flexible benefits unqualified
- a 401(k) (deferred compensation is excluded)
Also in Benefits
Defined in Lexicon. This page is generated from that document, so the two can't disagree.