What is a cafeteria plan?

Question

I know it is part of IRS Section 125, or a flexible spending account (FSA), but why is it called a cafeteria plan and why is it called that?

I think I made a double entry on the question.

What is a cafeteria plan and why is it call this?

Answer 1

A “cafeteria plan” means a written plan under which all participants must be employees; that is, it is not for some Joe off the streets who wants to get in on some investment or perquisite, and second -- [ and here's where the "cafeteria"-sounding portion comes into play ] -- the participants may choose among two or more benefits consisting of cash and qualified benefits [so determined by both the IRS section code and that employer's offering (or menu) ], and for which those "qualfiying" benefits are not part of the employee's usual salary or income.

'Sounds like something from off of a meal menu, yes? -- hence, cafeteria plan.

'Also sounds like still another tool that upper-middle-income workers are availed -- for the exclusive; you know --the "running for lunch bunch."

I might be wrong about this, however; it simply may be thought exotic enough so that few would otherwise know that it even exists and is available to anyone to whom the employer's HR office wishes to present it.

By the term "qualified," it means, one's explanation of a thing beyond the given that all know and understand, and which constitutes eligibility -- and so it defines what this may be and how it must carry, say, like a proviso of sorts. In other words, "this is qualifying if and only if..."

It's a whole lot of the usual financial rigmarole mixed with legalese gibberish, which leaves many to quip, "Why bother!"

Answer 2

"Cafeteria plan" refers to a benefit plan where you are given choices on what benefits you take up to a certain value. I suppose it's called that because it works like a cafeteria - they show you various items you can buy, and you choose which ones you want.

Answer 3

Why don't you call your local social services 800# & ask them. They should be able to tell you.