What governs the arrangements of cafeteria plans?

The arrangement of cafeteria plans is governed by the Internal Revenue Code (IRC) Section 125. This section provides the regulatory framework that allows employers to establish these flexible benefit plans, enabling employees to choose from a range of pre-tax benefits to suit their individual needs. The significance of IRC Section 125 lies in its provision for tax advantages associated with these plans, allowing employees to allocate a portion of their salary to select benefits without facing immediate taxation.

While IRS regulations do play a role in interpreting and enforcing the provisions laid out in IRC Section 125, it is the section itself that explicitly defines what constitutes a cafeteria plan and the benefits it can include. The Employee Benefit Security Act, on the other hand, primarily focuses on the regulation of employee benefit plans but does not specifically govern cafeteria plans. Similarly, Health Insurance Portability Contracts are related to health insurance coverage but are not relevant to cafeteria plan guidelines. Thus, the clarity and direct applicability of IRC Section 125 make it the foundational governing statute for cafeteria plans.