During this grace period, participants can access unused amounts for reimbursement of. Section 125 nondiscrimination testing what is section 125 nondiscrimination testing. 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. Fsaenrollmentauthorization form this is a generic form, call cpa inc if you need information on your plan specs. 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. This means drafting a new document and giving a copy to every employee eligible for the plan. Resolution to adopt a plan includes minutes of the meeting to adopt the hra plan as an employee benefit. Core documents adds section 125 premium only plan mp3 audio. 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. Although all cafeteria plans must satisfy key section 125 provisions, not all plans are the same. While there are different types of section 125 plans. Section 125 cafeteria plan employer guide core documents, inc.
The section 125 cafeteria plan is regulated by the internal revenue service. As succinctly, as possible, what you need to know about the three different benefits that make up a full section 125. 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. 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. Under a section 125 program you may choose to pay for qualified benefit premiums before any taxes are deducted from employee paychecks. This plan allows employees to choose to withhold pretax salary to cover the cost of specific benefits, or to choose between taxable and nontaxable. Section 125 of the internal revenue code is available only for employees and excludes soleproprietors, partners, and individuals owning 2% or more of the.
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. Irs section 125 premium only plan pop aplaz group inc. One tool available to meet this challenge is the section 125 plan. Is your cafeteria plan document full of plot holes. Section 125 plan common questions business benefits group. An employer has a selffunded medical plan, selffunded dental, selffunded short term disability, vision, group legal, group life and voluntary life. Tax free premiums offers an automated, convenient, low cost, and 100% compliant irs section 125 premium only plans for you and your employees. Tax free premiums irs section 125 premium only plans. The purpose of the plan is to allow employees the opportunity to elect.
Core documents releases educational brochures on section. 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. 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. Forms can be printed, downloaded, completed and faxed or mailed back to us. Free or cheaper section 125 plan documents from stock forms or automated. The following services are included in our pretax premium plan. Section 125 is the part of the irs code that allows employees to purchase health insurance and other ancillary benefits tax free. Nov 28, 2012 one tool available to meet this challenge is the section 125 plan. This document needs to be filed with all legal documentation, in the event you need to show evidence of having proper filing. These benefits can include health insurance, child care, adoption assistance, life insurance and health savings accounts.
A town has a cafeteria plan section 125 plan, which offers dependent care assistance. Medical and health spending accounts increase in maximum deferral. Mar 27, 2019 what is a section 125 cafeteria plan document. A section 125 cafeteria plan lets a business owner offer affordable employee benefits while giving themselves a payroll tax break. Section 125 plan documents also need to be restated whenever there is a change in your plan or in the law governing the plan. 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 premium only plan is the building block of the section 125 plan. Documents included a cafeteria plan has certain document requirements which are included as part of the cafeteria plan manager. This plan is a win win scenario for the employee and the employer. Download the plan document fx4798 no other benefits components apply. Section 125 plans section 125 plans from paychex can save money for your company and employees. Advantages and disadvantages of a section 125 cafeteria plan. All employers know this an essential part of any group health insurance and ancillary benefit program.
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 is the case with our sample cafeteria plan documents. Recordkeeping is important for code section 125 benefits by rich glass, esq. The section 125 program is a tremendous opportunity for you to enhance your benefits package. 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. 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. Download the free core documents section 125 cafeteria plan employer. Cbia section 125 premium only plan insurance and employee.
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. A premium only plan pop is the simplest type of section 125 plan. The plan document is a longform description of whats offered in the cafeteria plan. Section 125 nondiscrimination testing sentinel benefits. 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. 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. 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. The plan is intended to qualify as a cafeteria plan under section 125 of the code so that optional. Section 125 premium only plan texas health benefits, inc. Section 125 is officially an irs pretax vehicle nicknamed. 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. Irs forms needed to implement a section 125 plan bizfluent.
Section 125 medical and health spending accounts employee. Benefits outsource has simplified managing your section 125 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. How to set up your cafeteria plan for pretax employee benefits. Tmobile 2019 summary plan descriptionrevised 05242019. Section 125 plans are also commonly referred to as cafeteria plans. 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. Every employer offering at least a taxfavored payroll deduction or medical, dental or other benefits must have an up to date plan document. It is an employee benefit that allows the employer to deduct pretax employee contributions to pay for health, dental and vision premiums. A detailed plan document which is the governing body of your plan has. To download your free section 125 premium only plan document, log in to the secure employer website. Address and fax information is provided on each form. As an employer when do i have to file a section 125 plan.
It is the easiest type of section 125 plan to maintain and it involves little or no annual discrimination testing. Section 125 cafeteria plans overview sullivan benefits. Now is the perfect time for employers to check on whether they need a 2019 section 125 plan document update. Many of the benefits that may be provided through a section 125 plan are subject to the employee retirement income security act erisa. This saves both the employer and the employee money on income taxes and social security taxes. 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. The only change required by the section 125 premium only plan is that the insurance premium be deducted on a pretax basis. Visit us for more information on section 125 documents. 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. 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. 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. You may find this date for an existing plan on prior plan documents or on your form 5500, if applicable. Such documents include a master plan document and an adoption agreement sometimes combined into one document that detail the legal and. Faqs for government entities regarding cafeteria plans.
An fsa cannot provide a cumulative benefit to the employee beyond the plan year. Thus, regardless of whether the cafeteria plan is from a private, government, church or nonprofit employer, it remains subject to the cafeteria plan rules. An fsa cannot provide a cumulative benefit to the employee beyond. Health fsa can have longer waiting period than pop or dependent care fsa. In the case of an insured plan, the maximum amount reasonably available must be determined on the basis of the underlying coverage. A premiumonly plan pop, or cafeteria plan, is a written plan maintained by an. A section 125 premium only plan pop and flexible spending account fsa, also known as cafeteria. Section 125 premiumonly plan an irs requirement made hasslefree by healthequity what is a premiumonly plan. By signing and submitting this plan document checklist, the employer authorizes rothrock payroll services, ltd. 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.
Beware of free or selfserve section 125 plan documents core. Your plan allows employees to pay for their health care and dependent care expenses on a pre. This means the employer will need to deduct the insurance premium from the gross salary before computing the fica, federal and state income taxes. As an expert in administering the section 125 plan, otherwise known as the cafeteria plan, benefits outsource provide clients with a.
Summary plan description for medical, dental, vision, section 125 flexible spending account. Answers your questions about section 125 pop plan document in minutes and. If you are unsure which wages should be covered, submit your plan documents. Section 125 cafeteria plans modification of application. Recordkeeping is important for code section 125 benefits. There are three kinds of documents typically provided with a section 125 pretax cafeteria 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. So the apparent problem is that j made pretax salary reductions without a section 125 plan in place. How to set up your cafeteria plan for pretax employee. 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. Erisa includes its own set of requirements for written plan documents and spds, which are different from the section 125 plan document requirements. It works by making one simple adjustment in your payroll process employees pay their portion.
Section 125 of the internal revenue code irc governs cafeteria plans. 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. The section 125 program is a tremendous opportunity for you to. With our service, you can create your 125 premium only plan documents online. 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. Section 125 premium only plan document for churches. In 2007 connecticut enacted a requirement that certain employers establish cafeteria plans under section 125 of the internal revenue code.
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. 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. Enter the restated date as the first day of the current or new plan year in which this document is effective. Cut your payroll taxes and increase your employees takehome pay. The premium only plan reduces your taxable payroll. 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. The tax calculator provides an indicator for the potential savings that can be. 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. 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. The section 125 premium only plan pop saves you and your employees money by reducing payroll taxes. As is the case with our sample cafeteria plan documents since past special enrollment rights had only a 30day timeframe. It is the intent that this plan shall qualify as a section 125 plan of irc, as amended from time to time. 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.