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Flexible benefits in the workplace

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This factsheet summarizes coverage and features of flexible benefits, dependent care flexible spending accounts, and healthcare flexible spending accounts. These benefits are referred to as cafeteria benefits and provide employee benefit choices and flexibility. Similar to picking out an entrée, salad, dessert, and beverage in a lunchroom, cafeteria benefits allow employees to select healthcare, dependent care, and other benefit coverage.

Cafeteria plans provide employees with the ability to convert a taxable cash benefit into a nontaxable benefit. Similar to a prepaid card, the employer determines the dollar amount or credits available and the employee can select to spend some, all, or none on a variety of benefits–à la carte benefits.

Cafeteria benefits are deducted from wages and salaries before taxes (pre-tax), so instead of using after tax wages and salaries to pay for these benefits, employees can purchase these benefits or contribute to savings and may save money.⁽¹⁾

The BLS publishes the percentage of workers with access⁽²⁾ to cafeteria benefits by various worker⁽³⁾ and establishment⁽⁴⁾ characteristics. Chart 1 provides a summary of the percentage of workers with access to individual cafeteria benefits by occupational group and the sections explain the features of each benefit.

Table 1. Percentage of private industry workers with access to cafeteria benefits by occupational group, March 2021

Table 1. Percentage of private industry workers with access to cafeteria benefits by occupational group, March 2024
Occupation	Healthcare flexible spending account	Dependent care flexible spending account	Flexible benefits
Management, professional and related occupations	65	62	18
Production, transportation, and material moving occupations	48	43	9
Sales and office occupations	47	44	10
Natural resources, construction, and maintenance occupations	33	27	7
Service occupations	26	23	6
Source: U.S. Bureau of Labor Statistics, National Compensation Survey

Flexible benefits

In March 2024, 15 percent of civilian workers⁽⁵⁾ had access to flexible benefits, where 11 percent of private industry workers had access and 36 percent of state and local government had access to this benefit. Within the education and health care industry, 36 percent of workers in junior colleges, colleges, and universities had access to flexible benefits, 37 percent of elementary and secondary school workers, and 35 percent of hospital industry workers had access. (See chart 2.)

In a flexible benefits plan, employers provide workers with “benefits credits.” These credits may equal a fixed dollar amount for each worker, or an amount that varies according to the employee's earnings, length of service, size of family, or other characteristics. The employee then chooses from various benefits and benefit levels, using credits to purchase the desired benefits. If the credits do not pay for the benefit, employees may be able to fund the difference with pre-tax dollars.

Several options are usually available in flexible benefits plans, including various levels of coverage for life insurance, dental care, medical care, or long-term disability insurance. Employees covered by flexible benefits plans may receive cash in place of benefits or deposit unused credits into reimbursement accounts (such as dependent care or flexible spending account). They also may purchase short-term disability coverage, deposit credits into a retirement plan, or buy and sell vacation days. Participants are often required to purchase minimum levels of coverage, such as a basic level of life insurance.

Table 2. Percentage of civilian workers with access to flexible benefits

Chart 2. Percentage of civilian workers with access to flexible benefits
Industry	Elementary and secondary schools	Hospitals	Junior colleges, colleges, universities, and professional schools
2020	36	35	35
2021	35	36	35
2022	35	34	35
2023	36	37	36
2024	37	35	36
Source: U.S. Bureau of Labor Statistics, National Compensation Survey

Dependent care flexible spending accounts

Forty-six percent of civilian workers had access to dependent care flexible spending accounts in 2024. Within private industry occupational groups, access to dependent care benefits ranged from 23 percent for workers in service occupations to 62 percent for workers in management, professional, and related occupations. In 2015, 38 percent of private industry workers had access to this benefit and 43 percent had access in 2024. (See chart 3.)

Employees can use these pre-tax benefits to pay for dependent care services for childcare and for elderly or disabled relatives. This benefit provides workers with flexibility to pay for dependent care programs, such as preschool, summer day camp, before and after school programs, and child or adult daycare. The expenses of these dependent programs can be a significant commitment for employees, so employees can take advantage of the tax benefits to reduce the burden.

Table 3. Percentage of workers with access to dependent care flexible spending accounts

Table 3. Percentage of workers with access to dependent care flexible spending accounts
Year	Private industry workers	State and local government workers
2015	38	54
2016	37	55
2017	38	62
2018	39	63
2019	39	63
2020	40	63
2021	39	65
2022	40	65
2023	41	65
2024	43	66
Source: U.S. Bureau of Labor Statistics, National Compensation Survey

Healthcare flexible spending accounts

The percentage of private industry workers with access to healthcare flexible spending accounts in 2015 was 40 percent and 47 percent in 2024. Seventy-two percent of state and local government workers had access in 2024. (See chart 4.)

Healthcare flexible spending accounts allow workers to contribute a set pre-tax amount per year to pay for eligible medical, dental, and vision care expenses not covered by their health insurance plan. Examples of eligible costs include deductibles, copayments, prescription drugs, premiums, and coinsurance. A worker may contribute to this plan to treat an illness; pay for surgery, such as laser eye surgery or medically necessary cosmetic surgery; and buy medical equipment, such as hearing aids, braces, or compression clothing. Healthcare flexible spending accounts do not cover costs for elective cosmetic procedures, such as tattoo removal, facelifts, and teeth whitening.

Regardless of the reason, contributing to a healthcare flexible spending account can be a financially beneficial decision for individuals requiring healthcare.

Table 4. Percentage of workers with access to dependent care flexible spending accounts

Contributions

Most employees participating in flexible benefits plans, dependent spending accounts, or healthcare spending accounts are required to contribute toward the cost of their benefits, or they may contribute to obtain additional benefits. These contributions are usually made as a salary reduction, which results in lower income tax liabilities.

More information

Estimates on the cost, coverage, and provisions of employer–sponsored benefit plans from 2010 to the present are available through the Excel dataset and public database. Benefit estimates are not a time series and users are advised to consider changes in survey design, survey scope, estimation methods, weighting, and sample rotation when analyzing the data. Join the BLS Mailing Lists to receive notification of the latest data releases.

The glossary of employee benefit terms provides definitions for plans, provisions, coverage, and related terms. The National Compensation Measures Handbook of Methods provides information on the survey design, calculations, weighting, and imputation methods used to produce compensation estimates. The calculation section includes information on the measures of reliability available for each estimate. Additional information on Employee Benefits can be found in the EBS Publications, Monthly Labor Review, and the questions and answers page.

END NOTES

⁽¹⁾ Stolzfus, Eli “Pretax Benefits: Access to Section 125 Cafeteria Benefits and Health Savings Accounts in the United States, Private Industry” March 28, 2007, Compensation and Working Conditions.

⁽²⁾ Employees are considered to have access to a benefit plan if it is available for their use. For example, if an employee is permitted to participate in a medical plan offered by the employer, but the employee declines to do so, he or she is placed in a category with those having access to medical care benefits.

⁽³⁾ Worker characteristics includes work status (full- and part-time), bargaining status (union and nonunion), average wage within percentile categories, and occupational group.

⁽⁴⁾ Establishment characteristics includes industry group, size class, and geographic location.

⁽⁵⁾ Civilian workers includes private industry as well as state and local government workers.

Last Modified Date: September 19, 2024