A salary-reduction plan has tax benefits to the employee because the contributed income is not included in the employee's salary.

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A salary-reduction plan, also known as a "cafeteria plan," allows employees to contribute a portion of their pre-tax income to certain benefits such as health insurance, retirement plans, and dependent care. This reduces the employee's taxable income and therefore lowers their tax liability, resulting in tax benefits for the employee.

A Salary-Reduction Plan Has Tax Benefits to the Employee Because