Section 125 Plan Document
Are you deducting premiums pretax without a Section 125 plan document? Well, the IRS or Department of Labor can hit you with some hefty penalties up to $10,000. But that’s not all. In a worst case scenario, the pre-tax deductions may be disallowed from the beginning, leading to an IRS assessment of overdue back taxes plus interest and penalties. Also, as an employer, you are increasing your liability and risk of further investigation by the IRS or DOL on all compliance requirements.
How Section 125 Premium-Only-Plans (POP) Benefit Employees? Employees save up to 40% on federal income taxes alone. Under a POP plan, an employee’s take-home pay is increased, effectively reducing the cost of purchase adequate health insurance.
How Section 125 Premium-Only-Plans (POP) Benefit Employers? Employers benefit by reducing their tax liability. With POP, employers do not have to pay FICA/FUTA taxes (~7.65%) on dollars that employees use toward the cost of their individual (or group) health, dental, vision and other insurance premiums.
As an employer, you have multiple tasks to juggle. The scenarios above can clearly be avoided through the guidance and advice of the professionals. Make sure that your Section 125 Premium Only Plan (POP) documents are updated and in compliance today!
Typically, plan documents costs in the $100 – $350 fee per year with a third party administrator (TPA). TREK is one of a few brokers that will provide a current Section 125 Plan document to clients for FREE!
Thomas C Richards ¦ 602.859.1377 ¦ Trek Insurance Group, LLC ¦ Tom@TREKInsuranceGroup.com
