Save Money with These Top 5 Section 125 Plan Tips
Time is money and administering your Section 125 Premium Only Plan (POP) shouldn’t be something that costs you money, instead it should be saving it. We have compiled a list of the top 5 things to consider when deciding how to administer your Premium Only Plan.
1. Where are your documents?
Have you ever seen the cafeteria plan documents that allow your company to legally deduct employee paid premiums on a pre tax basis? Make sure your plan documents and summary plan description (SPD) are easy to access in the event you are audited by the IRS.
2. Have you distributed the SPD and enrollment paperwork to eligible employees?
A key component to administering a premium only plan is making sure your employees receive the appropriate legal documentation. If you haven’t been distributing this documentation the time to get started is now. Remember these documents can be distributed electronically if you would like to save on the printing cost.
3. When was the last time your documents were updated?
The laws and regulations covering Section 125 Cafeteria Plans change on a frequent basis. If your document is a few years old it is most likely out of compliance. To make sure you are not alone in your efforts to stay current with all legal changes, hire a service like TaxFreePremiums who will update your documents for you as the laws change.
4. How are you doing your required non-discrimination testing?
Every year companies who have premium only plans are required to run discrimination testing. Make sure you are keeping the results from the testing with your plan documents. If you are not doing the non-discrimination testing, follow-up with your document provider to insure this testing has been performed. You will want to review your current provider if they do not provide the non-discrimination testing.
5. How are you monitoring who is enrolled in the premium only plan?
As you administer the POP plan, it is important to understand who is eligible to benefit from the tax savings. Remember that owners in an S-Corporation owning more than 2%, partners in a partnership, and members of an LLC are not eligible to participate in the premium only plan.
The time and money spent on providing progressive employee benefits continue to rise due to increased regulation. Administering your company’s Section 125 Premium Only Plan should not be adding to these costs, it should actually be saving you money. If you have questions regarding administration and other aspects of Section 125 Cafeteria Plans contact TaxFreePremiums at (877) 366-8702 or start a live chat now.