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MISSISSIPPI DIVISION OF MEDICAID Eligibility Policy and Procedures Manual CHAPTER 200A – Income: ABD Categories Page |101 Effective Month: July 2025 Absent evidence to the contrary, if FICA taxes have been deducted from an item assume it meets the definition of wages. 200A.09.03 CAFETERIA PLANS A cafeteria plan is a written benefit plan offered by an employer in which: • All participants are employees and • Participants choose cafeteria-style from a menu of two or more cash or qualified benefits. A qualified benefit is not considered part of an employee’s gross income. Qualified benefits include, but are not limited to: • Accident and health plans, including medical plans, vision plans, dental plans, accident and disability insurance. • Group term life insurance plans up to $50,000 • Dependent care assistance plans • Certain stock bonus plans under Section 401(k)(2) of the IRC, but not 401(k)(1) plans. NOTE: Cash is not a qualified benefit. Salary Reduction Agreement A salary-reduction agreement is an agreement between the employer and employee whereby the employee, in exchange for the right to participate in a cafeteria plan, accepts a lower salary or foregoes a salary increase. Most pay slips do not reflect that a salary-reduction agreement exists. However, the amount of a salary-reduction agreement is not part of gross income and is not subject to Social Security, Medicare or other income taxes. Amounts used to purchase qualified benefits with a salary- reduction agreement are not the employee’s wages and are not considered income for Medicaid purposes. Employer Contributions Many cafeteria plans are funded by salary-reduction agreements; however, employers may also contribute to fund basic benefit levels under a cafeteria plan. Amounts an employer contributes to fund basic benefit levels under a cafeteria plan, with or without a salary reduction agreement, are not the employee’s wages and are not considered income for Medicaid purposes.