Cafeteria plans allow employers to compensate employees by offering a combination of cash and tax-favored “fringe” benefits (health/disability INSURANCE, dependent care, or group term life insurance). Generally, when cash is an option, it is taxable. However, under a cafeteria plan the employee can choose a nontaxable benefit and receive it free of both federal INCOME and payroll (SOCIAL SECURITY and Medicare) taxes. Cafeteria plans provide flexibility for the employee to elect benefits that meet individual needs. This ability to choose allows the employee to select cash in the early career years, dependent-care assistance when children are young, and life insurance when dependent care is no longer needed. The employer is relieved of offering the maximum benefits to all the employees, but can instead offer to fund a minimum level of benefits and include a contribution to the cafeteria plan, which would allow the employee to choose which benefits to maximize. Long-term care insurance is one tax-favored fringe benefit that is not includable in a cafeteria plan. Linda Bradley