A section 125 plan is the only means by which an employer can offer employees a choice between taxable and nontaxable benefits without the choice causing the benefits. A detailed plan document which is the governing body of your plan has. You may find this date for an existing plan on prior plan documents or on your form 5500, if applicable. A pop plan is used when health insurance, dental insurance andor vision insurance are the only benefits that the employees will be paying for on a pretax basis. Mar 27, 2019 what is a section 125 cafeteria plan document. While there are different types of section 125 plans.
How to set up your cafeteria plan for pretax employee. A premiumonly plan pop, or cafeteria plan, is a written plan maintained by an. An fsa cannot provide a cumulative benefit to the employee beyond the plan year. Section 125 cafeteria plan employer guide core documents, inc. Dec 02, 2007 bradenton, fl prweb december 2, 2007 core documents, the nations leading provider of affordable employer solutions for establishing and administering section 125 cafeteria plans, hsa plans and hra plans announced today a more convenient way to learn how a section 125 plan can eliminate income tax on employee insurance premium. The premium only plan reduces your taxable payroll. Cbia section 125 premium only plan insurance and employee. The premium only plan is the building block of the section 125 plan. Section 125 premiumonly plan an irs requirement made hasslefree by healthequity what is a premiumonly plan. The only change required by the section 125 premium only plan is that the insurance premium be deducted on a pretax basis. The purpose of the plan is to allow employees the opportunity to elect to pay the portion of medical insurance premium costs, for which they are responsible. The plan is intended to qualify as a cafeteria plan under section 125 of the code so that optional. Section 125 is officially an irs pretax vehicle nicknamed.
Such documents include a master plan document and an adoption agreement sometimes combined into one document that detail the legal and. Section 125 plans are a tax savings employee benefit plan that allows participating employees to direct a portion of their pretax salary to be used to pay for approved premiums, health. It is the easiest type of section 125 plan to maintain and it involves little or no annual discrimination testing. The section 125 cafeteria plan is regulated by the internal revenue service. A cafeteria plan is defined in 125 d1 as a written plan maintained by an employer under which all participants are employees, and the participants may choose among two or more.
There are three kinds of documents typically provided with a section 125 pretax cafeteria plan. Download the plan document fx4798 no other benefits components apply. Irs forms needed to implement a section 125 plan bizfluent. During this grace period, participants can access unused amounts for reimbursement of. One tool available to meet this challenge is the section 125 plan. To download your free section 125 premium only plan document, log in to the secure employer website. Tax free premiums irs section 125 premium only plans. Tax free premiums offers an automated, convenient, low cost, and 100% compliant irs section 125 premium only plans for you and your employees. Pretax premium plan services you dont need to worry about handling the administrative aspects of a pretax premium plan, unitedhealthcare will handle it for you and we will provide you with the necessary legal documents and. Answers your questions about section 125 pop plan document in minutes and. Faqs for government entities regarding cafeteria plans. Nov 28, 2012 one tool available to meet this challenge is the section 125 plan. These benefits can include health insurance, child care, adoption assistance, life insurance and health savings accounts.
As an employer when do i have to file a section 125 plan. Section 125 cafeteria plan documents section 125 plans are an erisa legal requirement for any member that makes pretax deductions for employee benefits from payroll checks. Irs code, section 125 d 1, sets the section 125 plan document requirement for employers offering the option of paying for health insurance and other benefits with a pretax salary deduction. Premium only plan pop plan it is the intent that this plan shall qualify as a section 125 plan of irc, as amended from time to time. An insurance benefit plan that employers may offer under federal tax law that allows employees to pay for health care coverage and other qualified benefits on a pretax basis. Recordkeeping is important for code section 125 benefits. Documents included a cafeteria plan has certain document requirements which are included as part of the cafeteria plan manager. Resolution to adopt a plan includes minutes of the meeting to adopt the hra plan as an employee benefit.
Jul 03, 2008 the statute defines a cafeteria plan to be a written plan under which all participants are employees, and the participants may choose among 2 or more benefits consisting of cash and qualified benefits. The following services are included in our pretax premium plan. A premiumonly plan pop, or cafeteria plan, is a written plan maintained by an employer for its employees that meet the specific requirements and regulations of section 125 of the internal revenue code. Core admin all of the section 125 plans pop and fsas come with an employer guide for selfadministration, but not every employer wants to deal with the daily claims, account changes, and especially the liability that comes with hipaa privacy law. It is the intent that this plan shall qualify as a section 125 plan of irc, as amended from time to time. Section 125 plans section 125 plans from paychex can save money for your company and employees. In the case of an insured plan, the maximum amount reasonably available must be determined on the basis of the underlying coverage. Many of the benefits that may be provided through a section 125 plan are subject to the employee retirement income security act erisa. The section 125 premium only plan pop saves you and your employees money by reducing payroll taxes. Section 125 is the part of the irs code that allows employees to purchase health insurance and other ancillary benefits tax free.
All employers know this an essential part of any group health insurance and ancillary benefit program. An employer has a selffunded medical plan, selffunded dental, selffunded short term disability, vision, group legal, group life and voluntary life. Section 125 medical and health spending accounts employee. Download the free core documents section 125 cafeteria plan employer. A cafeteria plan is defined in 125d1 as a written plan maintained by an employer under which all participants are employees, and the participants may choose among two or more. So the apparent problem is that j made pretax salary reductions without a section 125 plan in place. Core documents adds section 125 premium only plan mp3 audio. A premium only plan pop is the simplest type of section 125 plan. A pop is a section 125 cafeteria plan that allows employersponsored premium payments to be paid by the employee on a pretax basis instead of aftertax. Your plan allows employees to pay for their health care and dependent care expenses on a pre. This document needs to be filed with all legal documentation, in the event you need to show evidence of having proper filing. Every employer offering at least a taxfavored payroll deduction or medical, dental or other benefits must have an up to date plan document. Enter the restated date as the first day of the current or new plan year in which this document is effective.
Dependent care assistance account means the account established with respect to the participants election to have dependent care expenses reimbursed by the plan pursuant to section 4. This means drafting a new document and giving a copy to every employee eligible for the plan. Your plan document waiting period just allows employees to pretax their insurance premium, it does not make them eligible for your group insurances 1st day of employment allows them to pretax premium as soon as they are eligible for insurance. As an expert in administering the section 125 plan, otherwise known as the cafeteria plan, benefits outsource provide clients with a. It works by making one simple adjustment in your payroll process employees pay their portion. It works by making one simple adjustment in your payroll process employees pay their portion of insurance premiums on a pretax basis rather than on an aftertax basis. Tmobile 2019 summary plan descriptionrevised 05242019. As is the case with our sample cafeteria plan documents. Although most cafeteria plan documents include hipaa special enrollment rights under code section 9801f, many plans likely do not allow for a 60day election period. Section 125 cafeteria plans overview sullivan benefits. Although most cafeteria plan documents include hipaa special enrollment rights under code section 9801 f, many plans likely do not allow for a 60day election period. Visit us for more information on section 125 documents. This plan is a win win scenario for the employee and the employer. The section 125 program is a tremendous opportunity for you to enhance your benefits package.
Although all cafeteria plans must satisfy key section 125 provisions, not all plans are the same. The purpose of the plan is to allow employees the opportunity to elect. A town has a cafeteria plan section 125 plan, which offers dependent care assistance. Thus, regardless of whether the cafeteria plan is from a private, government, church or nonprofit employer, it remains subject to the cafeteria plan rules. Section 125 of the internal revenue code irc governs cafeteria plans. Section 125 of the internal revenue code is available only for employees and excludes soleproprietors, partners, and individuals owning 2% or more of the interest in an scorporation along with their immediate family members from participating in the premium only plan. Under a section 125 program you may choose to pay for qualified benefit premiums before any taxes are deducted from employee paychecks. A section 125 cafeteria plan lets a business owner offer affordable employee benefits while giving themselves a payroll tax break. Section 125 premium only plan document for churches. Benefits outsource has simplified managing your section 125 plan. By signing and submitting this plan document checklist, the employer authorizes rothrock payroll services, ltd.
This plan allows employees to choose to withhold pretax salary to cover the cost of specific benefits, or to choose between taxable and nontaxable. While there are different types of section 125 plans, each provides the opportunity to save money by reducing both the employers and employees tax liability. Mar 01, 2010 for example, how is the employer going to maintain the plan for the benefit of its employees who decides if a worker is an employee or an independent contractor for plan purposes and that the pop is operated in compliance with the requirements of section 125 and the regulations prop treas reg 1. Section 125 of the internal revenue code is available only for employees and excludes soleproprietors, partners, and individuals owning 2% or more of the. Summary plan description for medical, dental, vision, section 125 flexible spending account. This saves both the employer and the employee money on income taxes and social security taxes. A section 125 premium only plan pop and flexible spending account fsa, also known as cafeteria plans, can reduce fica, federal, and state and local taxes for your company and employees when combined with your companys group health insurance. Is your cafeteria plan document full of plot holes. As a benefit of your participation in cbia health connections, we can develop a section 125 premium only plan document for your company, at no cost. Medical and health spending accounts increase in maximum deferral. If you are unsure which wages should be covered, submit your plan documents. Section 125 plan common questions business benefits group.
Section 125 premium only plan texas health benefits, inc. The section 125 program is a tremendous opportunity for you to. With our service, you can create your 125 premium only plan documents online. Section 125 nondiscrimination testing sentinel benefits. In 2007 connecticut enacted a requirement that certain employers establish cafeteria plans under section 125 of the internal revenue code. Erisa includes its own set of requirements for written plan documents and spds, which are different from the section 125 plan document requirements. As is the case with our sample cafeteria plan documents since past special enrollment rights had only a 30day timeframe. As an employer when do i have to file a section 125 plan document and under what specific circumstances, a client has to either keep a section 125 plan document on file in the office. Section 125 plans are also commonly referred to as cafeteria plans.
The tax calculator provides an indicator for the potential savings that can be. This means the employer will need to deduct the insurance premium from the gross salary before computing the fica, federal and state income taxes. A section 125 premium only plan pop and flexible spending account fsa, also known as cafeteria. Irs section 125 premium only plan pop aplaz group inc. Beware of free or selfserve section 125 plan documents core. Section 125 plans are a tax savings employee benefit plan that allows participating employees to direct a portion of their pretax salary to be used to pay for approved premiums, health, dental and vision care expenses and dependent care expenses. As succinctly, as possible, what you need to know about the three different benefits that make up a full section 125 cafeteria plan keep in mind you can implement just one or any combination of these three plans. Fsaenrollmentauthorization form this is a generic form, call cpa inc if you need information on your plan specs. It is an employee benefit that allows the employer to deduct pretax employee contributions to pay for health, dental and vision premiums. As succinctly, as possible, what you need to know about the three different benefits that make up a full section 125.
Now is the perfect time for employers to check on whether they need a 2019 section 125 plan document update. Your plan document waiting period just allows employees to pretax their insurance premium, it does not make them eligible for your group insurances 1st day of employment. Section 125 cafeteria plans modification of application. Section 125 nondiscrimination testing what is section 125 nondiscrimination testing. Address and fax information is provided on each form. The section 125 cafeteria plan regulations and the patient protection and affordable care act aca require employers to take certain actions when an employee reduces hours. Free or cheaper section 125 plan documents from stock forms or automated. How to set up your cafeteria plan for pretax employee benefits. It is an employee benefit that allows the employer to deduct pretax employee contributions to pay for health, dental and vision.
An fsa cannot provide a cumulative benefit to the employee beyond. Recordkeeping is important for code section 125 benefits by rich glass, esq. Pretax premium plan services you dont need to worry about handling the administrative aspects of a pretax premium plan, unitedhealthcare will handle it for you and we will provide you with the necessary legal documents. Forms can be printed, downloaded, completed and faxed or mailed back to us. Advantages and disadvantages of a section 125 cafeteria plan. Download our free guide for 5 tips on how to empower yourself to find the best employees while understanding how the best employees will want. Section 125 plan documents also need to be restated whenever there is a change in your plan or in the law governing the plan. Health fsa can have longer waiting period than pop or dependent care fsa. The plan document is a longform description of whats offered in the cafeteria plan. According to the irs, a cafeteria plan is a separate written plan maintained by an employer for employees that meets the specific requirements of and regulations of section 125 of the internal revenue code. Cut your payroll taxes and increase your employees takehome pay. Core documents releases educational brochures on section.