Time to Update your Section 125 Plan?
If you’re an employer and have a health plan, it’s likely that you’re using a Section 125 plan to enjoy employee pretax deductions for medical premiums.
You may have recently received notice from your provider along with an invoice for $100 to renew your Section 125 plan. You may not necessarily need to renew your plan, but it’s a good time to review and make sure before you send the funds.
Section 125 of the Internal Revenue Code requires that Premium Only or Cafeteria plan documents be updated at least every five years. Section 125 plan documents also need to be restated whenever there is a change in your plan or in the law governing the plan.
When a new plan is drafted, or changes are made to an existing plan, all employees need to receive a copy of the document.
What is a Section 125 plan?
Section 125 plans allow employers to reduce taxes through pre-tax employee deductions to pay premiums for health insurance. Also known as a premium-only plan (POP) or Cafeteria plan, Section 125 plans can be expanded to include excepted and supplemental benefit premiums, flexible spending arrangements, and health savings accounts.
These plans are generally simple to set up and packed with value for the employer. The IRS only requires for an employer to have a group health plan to be eligible for the tax saving plan, and to have a simple “written plan document” administered and on file.
When does a plan document need to be updated?
The plan document needs an update whenever there is a change in your plan or in tax and health care law that require it. Because changes in tax law can happen frequently, many employers update their plan documents every other year just to be sure their plan is always current and compliant.
Here are some typical health plan changes that may require you to update your Section 125 plan:
- New carrier
- Employer contribution
- Plan eligibility
- ACA measurement period
- Plan year
There are other reasons of course, including changes to State law, which happen frequently. Best recommendation is to check with your healthcare or plan provider to determine whether you will need to update your Section 125 plan before your health plan renews.
For your convenience, Infinium partners with Core Documents to provide a self-direct option to create a basic Section 125 Premium Only Plan (POP), as well as other pretax plans. The Document Package provides everything an employer needs to update or establish a Section 125 Plan for only $99 (electronic delivery only). For employers also offering a Health Savings Account, the POP plus HSA module is just $129. Other modules for Section 125 Cafeteria Plans are available at similar prices (FSA, DCAP, Transit, and Adoption).
Please visit the link below for more information or email us at info@infiniumhr.com.