A flexible benefits plan is a type of cafeteria plan. Unlike a salary reduction premium payment plan, in a Code 125 flexible benefits plan the employer makes a nonelective contribution for every eligible employee, not just for employees who elect to pay for their insurance coverage with pre-tax dollars. Employees in a Code 125 flexible benefits plan can spend the employer contribution to buy a wide variety of 'qualified' benefits. If the employer contribution exceeds the cost of the employee's chosen benefits, the employee may take the excess cash as additional taxable wages, assuming the plan allows such a cash-out option. If the employer contribution is insufficient to pay for the cost of the employee's chosen benefits, the employee can reduce his salary to pay for the excess cost on a pre-tax basis.