Which group is restricted from participating directly in a Cafeteria plan?

Cafeteria plans, also known as flexible benefit plans, allow employees to choose from a variety of pre-tax benefits, tailoring their selection to their individual needs. However, certain groups, specifically self-employed individuals, are restricted from participating directly in these plans due to tax regulations established by the Internal Revenue Service (IRS).

The reason for this restriction lies in the fact that self-employed individuals are not classified as employees of an employer; thus, they do not have the employer-employee relationship that is necessary to participate in a cafeteria plan. This distinction is crucial because these plans are designed for employees under a common law standard, who have defined benefits under the guidance of an employer.

On the other hand, common law employees, independent contractors, and part-time employees may have some eligibility to participate, provided they are classified properly and meet the plan's specific requirements set forth by the employer. Cafeteria plans are intended to provide flexibility for the eligible workforce and build a benefits framework that caters to the needs of employees rather than self-employed individuals who operate independently.