This cafeteria plan allows employees to exclude allocated income from federal income tax to pay for the benefits.(Types of Flexible Benefit Plan Arrangements)

Question

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Pretax salary reduction plans allow employees to exclude a portion of their salary from federal income tax and use it to pay for benefits, such as the cafeteria plan described in the question. This is a common and straightforward type of flexible benefit plan arrangement. The other choices listed may involve more complex or customizable options for employees and employers, but they do not specifically address the tax advantages of a pretax salary reduction plan.

This Cafeteria Plan Allows Employees to Exclude Allocated Income from Federal