(a) The commissioner of finance and administration and the state treasurer, with the concurrence of the state insurance committee, are authorized to develop and implement a cafeteria plan for state employees as permitted by § 125 of the Internal Revenue Code of 1986 (26 U.S.C. § 125). The commissioner of finance and administration and the state treasurer are further authorized to offer state employees a qualified transportation fringe benefit plan in accordance with § 132(f) of the Internal Revenue Code of 1986 (26 U.S.C. § 132(f)), or any subsequent corresponding United States Internal Revenue Code section. The responsibility for development and implementation of such plans for employees of institutions of higher education is delegated to the chancellor of the board of regents and to the president of the University of Tennessee for employees of institutions under the University of Tennessee. Any political subdivision or instrumentality of the state, by resolution or ordinance of its governing body, is authorized to make available to its employees either a cafeteria plan as permitted by § 125 of the Internal Revenue Code of 1986, or a qualified transportation fringe benefit plan in accordance with § 132(f) of the Internal Revenue Code of 1986, or both.

(b) Any employer who has implemented a cafeteria plan pursuant to this section shall arrange for its employees' health insurance premiums and dental insurance premiums to be automatically paid through the cafeteria plan beginning January 1, 2008. Participation in other benefit options provided pursuant to this section is not automatic and requires an affirmative election by the employee authorizing the necessary payroll deductions and salary reductions for funding the benefits.

(c) Plans implemented pursuant to this section may either be administered internally or the party responsible for administration may contract with any person or entity otherwise eligible to provide for the services.

(d) With concurrence of the state insurance committee, the state treasurer may credit plan savings and assess the costs associated with administering these programs to the state agencies of participating employees, it being the intent that state agency payroll savings deriving from the plan be the funding source for administration.