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POP Plan or Cafeteria Plan
A POP plan is governed by Section 125 of the IRS tax code. A Premium Only Plan or POP Planis also referred to as a Cafeteria Plan or Flexible Benefits Plan (FSA). Employees enrolled in Cafeteria plans can set aside insurance premiums and other funds pretax that they can use for certain qualified medical and child care expenses. Since more participants in the plan equate to more tax savings for the employer.
The Section 125 Premium Only Plan is an option for employers who wish to provide an additional benefit to their employees without providing any other form of coverage. It is the only means for an employer to provide coverage for the family members of employees without providing other forms of insurance, including a general insurer. The plan may make benefits available to employees, their spouses and dependents. It may also include coverage of former employees but cannot exist primarily for them. The employer contributes to each employee’s plan to promote increased participation by those not yet in the section 125 plan. We offer a way for you to control the cost of employee benefits and enjoy substantial savings. POP plans are governed by Section 125 of the IRS tax code. The employer saves on the amount of matching FICA tax the employee has withheld from their paychecks on a pre-tax basis while the employee saves Federal, State and FICA taxes. Implementing a Cafeteria Plan is a win-win benefit for everyone.
Section 125 Services
Setting up and maintaining documents to help keep you in compliance is easy with automated tools.
Many companies have a Section 125 POP document on file, but it is out of date. Our automated, real-time updates make staying in compliance a breeze.
We make it easy to file your Section 125 POP Documents
HR Service, Inc. is a leader in preparing plan documents for Section 125 cafeteria plans, SPDs, and HRAs. You can rest assured that your company is safe and compliant with the IRS when using our services.
The most significant advantage of a POP Document is its tax-advantaged status.
When you pay for insurance through a Section 125 POP plan, the premiums are deducted from your paycheck on a pretax basis – that means they come out of your taxable income, reducing both your income tax and FICA taxes. It's like getting an instant pay raise!
Section 125 cafeteria plan allows an employee to reduce the gross income amount used to calculate Federal, Social Security, and some State taxes. This amounts to a savings of between 25% and 40% of every dollar they contribute to the plan.
Remind your employer that he gets this benefit too – his matching share of FICA and Medicare are reduced, as are FUTA and possibly state unemployment taxes.
Employers can increase their employees' share of insurance premiums without negatively affecting their take-home pay.
Employers need to ensure the rules outlined in the plan document and SPD are followed. Failure to administer a plan in accordance with the written terms of the plan and the Internal Revenue Code can result in the loss of the benefits' pretax status.
New employees must receive a copy of their plan sponsor’s latest Summary Plan Description within 90 days after becoming covered by the plan. Plan sponsors are not required to file a POP Document with the Department of Labor (DOL), although they are required to provide it to DOL upon request.
What are the Late Fees and Penalties for Non-Compliance?
The maximum criminal penalties for ERISA include fines of up to $100,000 and possibly ten years in jail. Businesses charged with ERISA violations can face criminal fines of up to $500,000, in addition to any civil liability.
Plan sponsor may be charged $110/day if it does not provide plan document, SPD, or Summary of Material Modifications (SMM) within 30 days of individual's written request. Failure to furnish plan-related information requested by the DOL carries a penalty of up to $161 per day, not to exceed $1,613 per request. Under ERISA, plan administrators must furnish to the DOL, upon request, any documents relating to the employee benefit plan.
What Benefits are Offered Under a Section 125 Plan?
Accidental death and dismemberment; Short- and long-term disability;
When do I have to Update my Documents?
The plan document needs an update whenever there is a change in your plan or in tax and health care law that requires an update.
How does a cafeteria plan work?
Employer contributions to the cafeteria plan are usually made based pm salary reduction agreements between the employer and the employee in which the employee agrees to contribute a portion of his or her salary on a pre-tax basis to pay for the qualified benefits.