employers mistakenly believe that Section 125 Plans are too complicated and
expensive to set up and they miss out on hundreds or thousands of dollars in
tax savings. The fact is that these plans are not complicated or expensive, and
the small costs that are involved are quickly recouped in tax savings. We offer free premium only plans to any business that use our services to offer benefits to their employee's.
major benefit of a Section 125 Plan is it allows employees to completely
eliminate income taxes on three separate types of out-of-pocket expenses
including: insurance premiums; medical expenses; and dependent care expenses.
Employers eliminate matching employment taxes for a 7.65% savings on all pretax
employers choose to only establish one of the three benefit options. For
instance, a group may decide to establish only the insurance component that
allows employees to eliminate all income taxes on their portion of insurance
employers decide to establish two components such as a premium plan and the
medical expense reimbursement plan, or a premium plan and the dependent care
plan. Employers only establish the components that are applicable to their
do employers need to know if they're interested in setting up a Section 125
IRS, under Section 125, requires employers to establish a written plan.
Department of Labor requires the sponsoring employer to distribute a Summary Plan Description to all employees participating in the Plan.
Plan Document and SPD simply needs to be available in the event of a Plan audit
by the IRS or Department of Labor.
Documents do not have to be filed with any governmental entities, such as the
IRS or Department of Labor, Massachusetts state government is a current
exception to this rule
IRS 5500 reporting for Section 125 Plans was suspended in 2002 for all but
Health FSA plans with more than 100 participants.
employee election forms should be kept on file for review or audit.
should receive a new SPD whenever documents are changed or updated and at least
once every five years.
8) Non-discrimination testing should be done once a year
to insure the Plan doesn't discriminate in favor of highly compensated or key