Which describes a cafeteria plan under section 125 of the Internal Revenue code?

• A. A quantified and accountable expense reimbursement plan
• B. A tax-qualified retirement plan for public education institutions
• C. A plan which permits employees to select from two or more qualified taxable and nontaxable benefits
• D. A plan whereby state government employees may request pretax dollars be set aside in a retirement account until age 59

Answer: (C)

A Section 125 cafeteria plan is a plan that lets employees choose from a menu of two or more benefits on a pre‑tax basis. The best description captures the essence: employees may select from two or more qualified benefits, including both taxable (like cash) and nontaxable benefits. This reflects the defining feature of a cafeteria plan—the ability to choose among multiple benefit options, with pre‑tax treatment applied to the selected benefits.

This differs from reimbursement or retirement arrangements, which aren’t cafeteria plans. The other options describe plans that are not Section 125 cafeteria plans (reimbursement plans, or retirement accounts for public education or government employees).