If employees contribute toward the cost of the companys group health, term life or disability insurance, or if they contribute to a health savings account hsa with pretax payroll deductions, a written section 125 plan must be in place. Status changes are included in the section 125 plan document. Although there havent been changes to the section 125 regulations since 2007, other laws have impacted the cafeteria plan rules, such as hipaa and the aca, as noted by adps workplace compliance spotlight. 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. The following services are included in our pretax premium plan. A single pdf is available for download that includes the tasc standard plan document and forms.
The section 125 premiumonly plan pop, which is a very common type of cafeteria plan, allows employers to offer benefits in accordance with section 125 of. Visit us for more information on section 125 documents. Without a section 125 plan, employee contributions can only be made with after tax dollars. 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. This document needs to be filed with all legal documentation, in the event you need to show evidence of having proper filing. I have a client who has a section 125 plan with medical fsa only.
The first step to having a compliant section 125 plan is your plan document. In this case, the plan administration includes more than just an annual update to the section 125 plan document. Section 125 is a written plan that lets employees choose between qualifying benefits and cash. Powerflex provides cafeteria plan administration software and section 125 and section 105 plan administration services for employers, third party administrators tpas, and benefits professionals, cafeteria plan administration software, section 125 plan third party administrator software, tpa software for flexible spending accounts, fsa administration software, flexible spending account software. Tax savings for everyone with a plan document a section 125 premium only plan document allows your employees to voluntarily agree to a salary reduction so that the employer can pay their insurance. Do it yourself cafeteria plan flex spending accounts. Under a section 125 plan, an employer offers its employees a traditional medical insurance plan and allows its employees to contribute pretax dollars to a health fsa. Powerflex irs compliant cafeteria plan documents, fsa plan. A section 125 plan is something that the employer must maintain separately from the health insurance policy or any other benefit program that their employees participate in.
The bestflexsm plan section 125 plan document 4 section 2. Wrap360 is maintained by experienced attorneys and a major erisa law firm so you can rest assured youre always getting accurate information. Eligible child means a child as defined in code 152f, if the child has not attained age 27 as of the end of the calendar year. Known by a variety of names cafeteria plan, section 125 cafeteria plan, pop plans, etc. Powerflex provides cafeteria plan administration software. Code where the treasury irs lays out the rules for employers wanting to allow employees the option of pretax salary deductions to pay group health and related insurance premiums. Dec 11, 2017 section 125 plans give your employees the power to choose from different benefits. Because of differences in facts, circumstances, and the laws of the various states, interested parties should consult their own attorneys. Such documents include a master plan document and an adoption. A section 125 plan document outlines specific details, such as a description of the employee benefits that are covered through the plan and what they cost. Separate plans are required when different employment requirements. Details in general, a cafeteria plan as defined in section 125 of the internal revenue code irc is a plan in which all participants are employees who choose from a minimum of two or more benefits that con. Learn what a section 125 plan is, how it works, and which benefits qualify.
The trusted source for over 20 years and 40,000 satisfied customers. How to set up your cafeteria plan for pretax employee. Frequently asked questions what is the difference between a full blown section 125 plan and a section 125 premium only plan. Organization name will automatically increase or decrease the amount of your salary reduction to correspond with changes in the cost of premiums. Nov 28, 2012 a section 125 plan allows employers to provide their employees with a choice between cash and certain qualified benefits without adverse tax consequences. The plan is intended to qualify as a cafeteria plan under section 125 of the code so that optional. The employer must do it through a premiumonly plan pop or cafeteria plan, and to set up one of those, you need a section 125 plan document. Complete document package including spd and all enrollment and election forms. This article provides an overview of section 125 cafeteria plans and related. As is the case with our sample cafeteria plan documents since past special enrollment rights had only a 30day timeframe. Premium only plan pop plan it is the intent that this plan shall qualify as a section 125 plan of irc, as amended from. Where you only pay once, not every year for a section 125 premium only plan, health fsa, dependent care fsa, wrap spd, qsehra or hra plan document. A cafeteria plan can limit enrollment in a health fsa to those employees who participate in the employers health insurance plan. Section 125 plans are an erisa legal requirement for any member that makes pretax deductions for employee benefits from payroll checks.
Summary plan descriptions spds which explain the plan to the employees is produced with a personalized touch. This is why we suggest working with a professional service like a peo, insurance broker, or hr software, to make sure your cafeteria plan is irs section 125 compliant. The section 125 plan is just a document that describes the specific ways in which the employer is allowing employees to take advantage of these pretax deduction options. These benefits can include health insurance, child care, adoption assistance, life insurance and health savings accounts. Each healthcare practice is responsible for ensuring compliance with hipaa and all applicable laws. These plans are for employers who do not want to offer a full flexible spending account fsa plan, but still want to offer a tax benefit for their eligible employees. Section 125 premiumonly plan an irs requirement made hasslefree by healthequity what is a premiumonly plan. The simplest way to comply with erisa requirements is a wrap plan document, which wraps health and welfare benefits into a single plan document and summary plan description spd.
A detailed plan document which is the governing body of your plan has been included for each cafeteria plan component. When it comes to benefit administration, section 125 plans can be a. Employers save payroll taxes and employees save income tax. A 125 cafeteria plan is a written plan that allows employees to elect between permitted taxable benefits such as cash and certain qualified benefits. To be compliant, your section 125 cafeteria plan must meet documentation and communication requirements. Loss of coverage under a state childrens health insurance program chip. Costeffective pcbased software gives you everything needed to produce and maintain accurate, affordable plan documents. Demystify erisa wrap requirements with wrap360, our interactive online spd and wrap plan generator tool. This plan allows employees to choose to withhold pretax salary to cover the cost of specific benefits, or to choose between taxable and nontaxable. A full section 125 cafeteria plan allows for fsa flexible spending accounts and dependent child care to be deducted from payroll on a pretax basis for eligible out of pocket expenses, but also most commonly includes the premium only plan language with the eligible benefit premiums. Why section 105 plans are better than section 125 plans post2014. It also includes participation rules, annual limits, and election procedures like what constitutes a qualifying event, such as a spouses job loss or a move. A section 125 also called a cafeteria plan is a written plan that lets employees choose between certain benefits. Cafeteria plan fis has everything you need to quickly and costeffectively build a cafeteria plan practice.
Under section 125 only one employment requirement is allowed for each cafeteria plan. Plan document adoption agreement article xi completion. Section 125 plans section 125 plans from paychex can save money for your company and employees. A cafeteria plan has certain document requirements which are included as part of the cafeteria plan manager. We encourage healthcare providers to consult with legal counsel regarding their. The written plan document must clearly identify certain. For the 2004 plan year they hit exactly 100 participants. 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 benefits consisting of cash and qualified benefits. 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. Before an employer can take advantage of benefit tax deductions for insurance premiums, outofpocket medical expenses, dependentadult. Mar 27, 2019 to be compliant, your section 125 cafeteria plan must meet documentation and communication requirements.
One tool available to meet this challenge is the section 125 plan. If an employee makes the election before the start of the plan year, and other 125 requirements are satisfied, the employees election of one or more qualified. Section 125 plan filing form 5500 benefitslink message. Here are the qualifying benefits you can include in your section 125 cafeteria plan document. So the apparent problem is that j made pretax salary reductions without a section 125 plan in place. A premium only plan contains limited language of the section 125 plan that only allows for eligible benefit premiums and hsa health savings account contributions to be withdrawn from payroll on a pretax basis. American fidelity will work with you to capture all the details in your benefits offering and help you properly implement and maintain your section 125 plan, including the plan document. Powerflex provides cafeteria plan administration software and. Section 125 flexible benefit plan section i purpose the employer is establishing this flexible benefit plan in order to make a broader range of benefits available to its employees and their beneficiaries. Plan document is effective unless the restated date entered in section 11. If there is no cafeteria plan document, if the document doesnt satisfy the plan document requirements or if the plan fails to operate in accordance with the terms of the plan or section 125 rules, the plan isnt a cafeteria plan and an employees election between taxable and nontaxable benefits results in gross income to the employee. This is why we suggest working with a professional service like a peo, insurance broker, or hr software, to make sure your cafeteria plan. These benefits can include health insurance, child care, adoption assistance, life. Irs forms needed to implement a section 125 plan bizfluent.
Core documents releases educational brochures on section 125. A section 125 pop or cafeteria plan is a written plan. 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. Apr 17, 2017 under section 125, employers can offer certain benefits on a pretax basis. Powerflex provides cafeteria plan administration software and section 125 and section 105 plan administration services for employers, third party administrators tpas, and benefits professionals, cafeteria plan administration software, section 125 plan third party administrator software, tpa software for flexible spending accounts, fsa administration software, flexible spending account. Both employers and employees save money on taxes, but only if the cafeteria plan is done. Fsaenrollmentauthorization form this is a generic form, call cpa inc if you need information on your plan specs.
Under section 125, employers can offer certain benefits on a pretax basis. Core documents releases educational brochures on section 125 pop click image to download. 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. Eligible employee means an employee eligible to participate in this plan as provided in the section titled. A section 125 plan document is required by the irs before employers can.
This plan allows employees to choose among different types of benefits. After completing a single checklist, your plan, summary plan description. Sample plan document section 125 flexible benefit plan version 0117 the attached plan document and adoption agreement are being provided for illustrative purposes only. Section 125 plans give your employees the power to choose from different benefits. The section 125 premiumonly plan pop, which is a very common type of cafeteria plan, allows employers to offer benefits in accordance with section 125 of the internal revenue code hence the name. Jul 03, 2008 so the apparent problem is that j made pretax salary reductions without a section 125 plan in place.
Set up a section 125 health insurance cafeteria plan payroll item in quickbooks desktop. It also eliminates the need to submit more than one form 5500. Tax free premiums irs section 125 premium only plans. The section 105 plan document describes the terms and conditions related to the operation and administration of the section 105 plan. Why the section 125 cafeteria plan needs a second look. If your plan includes only these standard forms, you may download the single pdf rather than each individual form. A cafeteria plan has certain document requirements which are included as part. Tax free premiums offers an automated, convenient, low cost, and 100% compliant irs section 125 premium only plans for you and your employees. In an ongoing effort to inform employers on the taxsaving benefits and requirements of employersponsored group health plans, core documents releases educational brochures on the section 125 plan document package and related flex plans. Section 402 of erisa mandates that every employee welfare benefit plan be established and maintained according to a written plan document. The answer that i always get is that the treasury regs say so. A section 125 plan is the only means by which an employer can. The third party administrator for a plan that includes fsa is also responsible for handling the processing of receipts that employees submit for legitimate fsa expenses like child care expenses.
Powerflex provides irs compliant plan document packages for cafeteria plans including section 125 premium conversion pop plans, fsas, hras, and transitparking plans. Set up a section 125 health insurance cafeteria plan. Section 125 cafeteria plans modification of application. Employers are required to demonstrate to the irs that their section 125 cafeteria plan and its component benefits do not discriminate in favor of highly. Use fiss checklist approach and youll see how quick and simple it is. Plan document, adoption resolution and summary plan. Section 125 plans are also commonly referred to as cafeteria plans. No outside administrator or software is needed to implement a section 125 plan. To the extent provided in the adoption agreement, the plan provides for the pretax payment of premiums and contributions to spending accounts that are excludable from gross. These include accident insurance, dependent care assistance, groupterm life insurance employee only, disability insurance, health savings accounts and flexible spending accounts.239 735 867 226 1439 1298 1347 1448 127 1524 1570 296 1074 557 875 654 1172 474 320 348 374 936 598 81 138 1109 477 638 1202 821 294 1425 63 1144 9 187