The Handbook of Employee Benefits, Rosenbloom, Jerry, 7th Edition - Ch. 25: Cafeteria Plan Design and Administration, (pp. 671-680, 686-699)

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Can anyone conceptually explain what is a cafeteria plan? Are most employer provided benefit plans that give you any options cafeteria plans? I understand there are some requirements they have to meet, etc, but in the real world, is this most of the employee benefit plans out there?

Hey @Barrel!
I wouldn’t say that as soon as you have choice, it’s considered a cafeteria plan. For instance, if you include voluntary benefits, or if the plan does not have 100% participation requirement, you still have a choice to elect benefits, but that does not make it a cafeteria plan.

In Canada, cafeteria plans are plans where there are different levels offered for the same benefit that an employee can choose from. So there could be 2-3 options for life, 2-3 options for Health, 2-3 options for Dental, and the employee evaluates their needs and chooses the options for each benefit that suits them best. Most of the time, the employer provides “flexible credits” which is basically another way of saying the employer contribution.

From the readings I understand that it’s similar in the US (though the list of eligible benefits is quite larger than what is offered here in Canada as far as I know)

Basically you’ll see cafeteria plans for larger employers, or groups, since you need to have more people in your group to mitigate the impact of anti-selection by introducing choice.

I hope that answers your question. Anyone else that wants to elaborate more (or completely disagrees with me), please feel free to add to my response!

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I wish I could say I understand what cafeteria means but I doubt I’m much closer. I’m also ok with making peace with just letting this topic go.

So does that mean cafeteria plans are when you have choices for involuntary benefits, and 100% participation is required?

Have you ever seen flex plans in your line of work?
Cafeteria plans are what we call (at least here in Canada) full flex plans. You usually see them with larger employers that have more generous benefits plans. The employee is given a choice between different levels for each benefit line (for instance there could be 2-3 options for medical, 2-3 options for dental, etc…)
As opposed to a traditional plan that has one option that applies to all employees.

The participation may or may not be 100%, it’s not a requirement to have a cafeteria plan.

Hope this helps, let me know if it’s still not clear.

Yes I think that helps. Every employer I’ve been with has had employees make some choice. Choosing a more generous or less generous health plan for example. It sounds like in practice most employers have cafeteria plans.

I would agree, this is helpful. Maybe it’s part of my privilege that I’ve never needed to look at my benefits very closely, but I also have a hard time putting a face to the name with cafeteria plans.

In my limited experience, I haven’t encountered any companies that have marketed their benefits as a “cafeteria plan” or anything like that. It’s usually more like “look at all of these benefits that we offer & our small-employer competitors don’t offer”, with no real definition of the plan type. I’m pretty sure what I have been thinking of as “good benefits” in the past has mostly equated to cafeteria plans, even though I don’t think they were specifically labelled as such.

Has anyone else had an employer explicitly state that they offer benefits through a cafeteria plan?

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