Because the dollars redirected into the cafeteria plan are not recognized as wages for Social Security purposes, salary reduction may result in slightly reduced Social Security benefits. There is no requirement that an employer inform employees of this consequence, but it would be prudent to do so. Young employees probably will not care about any reduction in Social Security since the effect on their wages may be minimal and because of uncertainty as to what Social Security will provide by the time they retire. Older employees may be more concerned about reduced benefits since they expect to collect Social Security relatively soon. However, to the extent an employee earns more than the Social Security wage base, there will be no reduction in Social Security benefits.

In order to offset any potential reduction in Social Security benefits, some have suggested that employees use the money they have saved through participating in the cafeteria plan to purchase supplemental retirement coverage from an insurance company. Another method of supplementing the reduction in Social Security benefits is for an employee to contribute the money they save to a retirement plan sponsored by the employer.