Under the IRC, which section regulates cafeteria plans?

Cafeteria plans are specifically governed by Section 125 of the Internal Revenue Code (IRC). These plans allow employees to select from a variety of pre-tax benefits, giving them the flexibility to tailor their benefits according to their individual needs. This feature of cafeteria plans is critical because it enables employers to provide a range of options aiding in employee satisfaction and retention.

The structure of Section 125 defines how these plans operate, including requirements that must be met for tax advantages, such as the legal structure and offerings of the menu of benefits. Employees benefit from this flexibility while also enjoying tax savings, as contributions to a cafeteria plan typically reduce their taxable income.

In contrast, the other sections listed deal with different topics within the IRC, which do not pertain to cafeteria plans. Section 123 involves general rules for certain transactions; Section 127 refers to educational assistance programs; and Section 129 pertains to dependent care assistance. Each of these sections serves distinct purposes in the tax code and does not cover the specifics of cafeteria plans as outlined in Section 125.