As used in this subchapter:
(1) “Cafeteria plan” means a written fringe benefits plan which meets the requirements of the Internal Revenue Code;
(2) “Eligible employee” means full-time employees of governmental entities;
(3) “Governmental entities” means any agency of the state, any city, any county, any school district, or any other political subdivision of this state; and
(4) “Salary reduction agreement” means a written agreement between an eligible employee and a governmental entity whereby the employee agrees to reduce his or her salary by a stated amount or an amount equal to the employee's cost of benefits selected under a cafeteria plan.