The Internal Revenue Service (IRS) issued guidance to allow companies to provide greater flexibility for employees participating in Section 125 cafeteria plans to account for changes in their medical and dependent care needs arising from the COVID-19 pandemic.
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Do you need a 125 - Premium Only Plan - POP?
The name “Section 125 Plan” POP, derives from Title 26, Section 125 of the United States tax code. This law outlines the rules employers must follow when establishing a cafeteria plan. It defines the term cafeteria plan and describes the types of benefits such a policy may include. The law prohibits programs that discriminate against lower-paid workers by favoring those who have high compensation. If you are found to be discriminatory, the benefits it provides to highly-paid workers will be taxed.
The 125 plan or POP Plan includes health, dental, accidental death and dismemberment, and even voluntary benefits. Volunteer benefits include examples such as cancer, accident, and other benefits. IRS tax laws require a 125 Premium Only Plan (POP) or a Flexible Spending Account (FSA) to pay medical, dental, and other eligible insurance premiums on a pretax basis.
Not only do employees keep more money in their pockets, you, as the employer, will save money, lower your taxes paid towards the employee’s Social Security match. HR Service Inc. POP Solutions, combined with our Premium Only Plan, is so convenient. You can easily create your plan documents and summary plan description using our web-based tool and easily make any needed updates. Additionally, we keep your document current when there are changes in the IRS requirements. We provide everything you need for a formal plan document. Best of all, it only takes a few minutes to create.
Also, we offer a tool to complete year-end non-discrimination testing that is required each year. Our staff is ready to assist you with anything. If you have any questions about how a Section 125 plan will benefit you and your employees, or what you need to submit, please contact us.
We make it Convenient to ensure you are Compliant
With Our Service, You can create your 125 Premium Only Plan documents online.
How much does a Premium Only Plan cost?
Typically a plan document and necessary forms will cost anywhere from $100-$600 through an attorney or tax advisor. Many payroll providers charge set-up fees as much as $600, but once you have the document, you will be required to update as new legislation is available. Our services are entirely affordable, and we guarantee to be less expensive than an attorney or payroll provider.
What is included?
As part of our service you are provided with:
- The Plan Document
- The Summary Plan Description
- Default Enrollment Notice Forms
- Non-discrimination Testing Software
- Compliance Updates – Any time there is a change to the law that requires your plan document to be changed, we will update the document online and let you know when it is ready for you to download and print your updated record.
NOTICE 2020-29: COVID-19 GUIDANCE UNDER SECTION 125 CAFETERIA PLANS &
NOTICE 2020-33: SECTION 125 CAFETERIA PLANS – MODIFICATION OF PERMISSIVE CARRYOVER RULE AND TIMING FOR REIMBURSEMENTS BY HEALTH PLANS