Which statement BEST describes a 'Section 125 cafeteria plan'?

Explanation

A 'cafeteria' or Section 125 plan under IRC §125 is a written employer plan that gives each employee the choice between cash (taxable wages) and one or more qualified non-taxable benefits, including employer-sponsored health insurance, health FSAs, dependent-care FSAs, HSA contributions, group term life insurance up to $50,000, and adoption assistance — exactly what the response describing a written §125 plan funded by pre-tax salary reduction states. Employee elections to receive the benefit instead of cash are funded with PRE-TAX salary reduction, reducing federal income tax, Social Security, and Medicare wages (a major efficiency for both employer and employee). Strict nondiscrimination rules under §125(b) prevent the plan from favoring highly compensated employees. The response describing a defined-contribution plan with a menu of employer-selected mutual funds confuses §125 with a §401(k). The subsidized on-site meal program administered by the Department of Labor is fabricated. The response that adds the employer's health contributions to taxable wages with an offsetting deduction is the opposite of how §125 works (pre-tax, not taxable).