A section 125 cafeteria plan allows employees to select what combination of benefits?

A section 125 cafeteria plan is designed to provide employees with the flexibility to choose from a variety of benefits, allowing them to tailor their compensation package to fit their individual needs. In this context, the correct response highlights that employees can select a combination of at least one taxable benefit and one qualified benefit.

Qualified benefits typically include items such as health insurance, dental and vision coverage, and other pre-tax benefits that can enhance employees' overall compensation without increasing their taxable income. Including at least one taxable benefit in the selection allows for flexibility and customization, catering to different employee preferences. This structure of allowing both types of benefits is a core feature of section 125 plans, making it possible for employees to balance their needs between taxable and non-taxable options.

The other scenarios, such as selecting only qualified benefits or only taxable benefits, do not capture the full intent of a cafeteria plan, which is to allow a mix that accommodates varied employee requirements. Therefore, being able to choose at least one of each maximizes employee satisfaction and engages them in the benefits selection process.