Some States Require an Employer to Sponsor a Section 125 Premium Only Plan

Some States Require an Employer to Sponsor a Section 125 Premium Only Plan

There are clear financial benefits to both the employer and the employee through a Section 125 Premium Only Plan.  Outside of some minor compliance updates and requirements in maintaining the plan there are little to no reason why an employer wouldn’t want to sponsor a Section 125 plan.  However there is another element to it as well; in many states it is legally required to have the POP plan if you sponsor a group benefits plan and require your employees to share in the cost of the plan.

If you are in Connecticut, you are required by law, specifically SB 1484, to offer this opportunity to your employees, if you have a group health care plan.  The employees have to be presented the opportunity and if for any reason they chose not to take it, you need to ensure you keep a record of their waiver of participation.  Based on the substantial tax benefits for both employees and employer to avoid FICA (Social Security & Medicare taxes) few will waive but legally you are required to present the option.

If you are a Florida employer SB 2534 requires you to establish a cafeteria if you are participating in the “Cover Florida Health Care Access Program”

Indiana has the Employer Health Benefit Plan Tax Credit. If the employer wants to be eligible for the tax credit, then the employer must set up a Section 125 cafeteria plan.

Iowa has a slightly more friendly law in this matter and it actually requires the insurance commissioner to help small businesses, essentially defined as companies with 25 employees or less, to set up a cafeteria plan. This is delineated in Health Care Bill HF 2539.

In Kansas the Senate Bill No. 81 actually extends to the insurance companies which set up the group plan and must offer the plan to its clients.

Maryland offers the Small Employer Health Benefit Plan Premium Subsidy Program and the senate bill 6 require that for the employers to qualify for this program they must offer the section 125 program to their employees.

The chapter 58 act in Massachusetts simply requires the employers to participate in this plan.  In Minnesota any employer with 11 or more employees must have a Section 125 Premium Only Plan.  Missouri (SS#2 SCS HCS HB 818), Rhode Island (S 0448) if an employer has more than 25 employees, and Tennessee (S 333 & H 3360) require the employers to offer this plan, and finally in Utah for an employer to use the Utah Health Insurance Exchange it is mandated in S188 that they have a section 125 plan.

There are many more states with pending or proposed legislation but if employers don’t just see the benefits in having the plan clearly your legislators are forcing the hand of some employers to curb the financial burden of their benefit plan through the use of these tax savings vehicles.