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A cafeteria plan - also known as a Section 125 plan, after the portion of the IRS code that regulates the plans - lets employees redirect part of their salaries and wages to pay for certain benefits.
A cafeteria plan or cafeteria system is a type of employee benefit plan offered in the United States pursuant to Section 125 of the Internal Revenue Code. [1] Its name comes from the earliest versions of such plans, which allowed employees to choose between different types of benefits, similar to the ability of a customer to choose among available items in a cafeteria.
Patient Protection and Affordable Care Act amended Section 125 [7] such that FSAs may not allow employees to choose an annual election in excess of a limit determined by the Internal Revenue Service. [8] The annual limit was $2,500 for the first plan year beginning after December 31, 2012. [9]
Because the plan only covered members' expenses at a single hospital (Baylor Hospital), it is also the forerunner of today's health maintenance organizations (HMOs). [26] [27] [28] In 1935, the Roosevelt Administration decided not to include a large-scale health insurance program as part of the new Social Security program.
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