Many employers use cafeteria plans to allow employees to pay their share of group health insurance premiums with pre-tax dollars. Health Flexible Spending Accounts (FSAs) and Dependent Care Assistance Programs (DCAPs) are also common offerings. But these aren’t the only benefits that can be included.
Employers looking to enhance their benefits package may be able to add several other options to their cafeteria plan.
Health Savings Account (HSA) Contributions
Employees who are eligible for a Health Savings Account (HSA) can generally make pre-tax HSA contributions through a cafeteria plan. This can be an attractive option for employees enrolled in a high-deductible health plan who want to save for current or future healthcare expenses.
Group-Term Life Insurance
A cafeteria plan may also include employer-sponsored group-term life insurance. However, employers should be aware that the value of coverage exceeding $50,000 may be taxable to the employee, unless paid for with after-tax dollars.
Disability Coverage
Short-term and long-term disability insurance can also be offered through a cafeteria plan. These benefits help provide income protection if an employee is unable to work due to an illness or injury.
Dental and Vision Benefits
Coverage under other employer-sponsored health plans, such as dental and vision insurance, may also be included. Offering these benefits through a cafeteria plan can help employees access important preventive and routine care while enjoying tax savings.
Paid Time Off (PTO) Programs
Some employers choose to allow employees to buy or sell vacation, sick leave, or personal days through a cafeteria plan. While these arrangements can provide greater flexibility, they are subject to specific IRS requirements and should be carefully structured to ensure compliance.
Contributions to a Dependent’s Trump Account
Beginning July 4, 2026, cafeteria plans may also permit contributions to a dependent’s Trump account. However, contributions cannot be made to an employee’s own Trump account through the cafeteria plan.
Keep Compliance in Mind
Before adding new benefits, employers should understand that each option comes with its own tax and legal considerations. In addition, cafeteria plans generally cannot be used to pay or reimburse premiums for individual health insurance policies that provide major medical coverage. A limited exception may apply in certain situations involving an Individual Coverage HRA (ICHRA).
The Bottom Line
Health insurance premiums, Health FSAs, and DCAPs may be the most familiar cafeteria plan benefits, but employers have several additional options available. Expanding your cafeteria plan can provide employees with greater choice and flexibility, provided the plan is structured to comply with applicable tax and benefits rules.
Source: Thomson Reuters