Which of the following is a primary disadvantage for employees participating in a Cafeteria Plan?

The chosen answer points to a significant aspect of Flexible Spending Accounts (FSAs) within Cafeteria Plans. One key disadvantage for employees participating in a Cafeteria Plan is that if they do not use the funds allocated to their FSAs by the end of the plan year, those funds are forfeited. This "use-it-or-lose-it" rule creates a financial risk for employees, as they may lose money if they overestimate their healthcare or dependent care expenses.

This forfeiture aspect is particularly critical because employees are encouraged to plan their contributions carefully to avoid losing any unused funds. If they do not fully utilize the funds within the designated timeframe, it can lead to frustration and financial loss.

The other options present different characteristics or elements of Cafeteria Plans but do not encapsulate a direct disadvantage. For example, the ability to make election changes throughout the year offers flexibility, which is generally a positive aspect. Automatic yearly benefit renewals can provide stability and predictability in benefits. While eligibility for tax credits may vary, it does not directly express a disadvantage strictly related to cafeteria plan participation. Thus, the forfeiture of unused funds is a prominent concern for employees in this context.