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A cafeteria plan is a separate written plan maintained by an the University of California for its employees that meets the specific requirements of and regulations of section 125 of the Internal Revenue Code (IRC). It provides participants an opportunity to receive certain benefits on a pretax basis. Participants in a cafeteria plan must be permitted to choose among at least one taxable benefit (such as cash) and one qualified benefit.
A qualified benefit is a benefit that does not defer compensation and is excludable from an employee’s gross income under a specific provision of the Internal RevenueCode, without being subject to the principles of constructive receipt. Qualified benefits include:

  • Accident and health benefits (but not Archer medical savings accounts or long-term care insurance);
  • Adoption assistance;
  • Dependent care assistance (i.e. day care expenses and or care for sick family member);
  • Group-term life insurance coverage;
  • Health savings accounts, including distributions to pay long-term care services.

For more information on section 125 benefits, visit the Human Resource website​ or call the Human Resource at (209) 228-8247.

Who may receive benefits under a cafeteria plan?

The plan may make benefits available to employees, their spouses and dependents. It may also include coverage of former employees, but cannot exist primarily for them.

How does a cafeteria plan work?

Employer contributions to the cafeteria plan are usually made pursuant to salary reduction agreements between the employer and the employee in which the employee agrees to contribute a portion of his or her salary on a pre-tax basis to pay for the qualified benefits. Salary reduction contributions are not actually or constructively received by the participant. Therefore, those contributions are not considered wages for federal income tax purposes. In addition, those sums generally are not subject to FICA and FUTA. See Sections 3121(a)(5)(G) and 3306(b)(5)(G) of the Internal Revenue Code.