Is a Section 125 plan subject to Erisa?

that may be provided through a Section 125 plan are subject to the Employee Retirement Income Security Act (ERISA). ERISA includes its own set of requirements for written plan documents and SPDs, which are different from the Section 125 plan document requirements.

What are considered Section 125 deductions?

Section 125 is the section of the IRS tax code where the items that can be deducted from employee pay on a pre-tax basis are defined. In the context of Section 125, “pre-tax” means that a deduction is exempt from Federal Income Tax Withholding, Social Security and Medicare Taxes.

Who needs a Section 125 plan?

125 plan is required for employers who want to allow employees to choose the qualified benefits they want and avoid paying income taxes on the amount of wages they contribute to obtain those benefits.

How much does it cost to set up a Section 125 plan?

Section 125 Plan Document package $99. The IRS requires a Section 125 Plan Document so that employees can pay for health premiums, FSA contributions, and other group benefits with tax-free payroll deductions. Employers save an average 8% to 10% in payroll taxes, too.

What is Section 125 Premium Only Plan?

A Section 125 premium-only-plan (POP), is a cafeteria plan which allows employees to pay their health insurance premiums with tax-free dollars. Using a Section 125 POP to pay for insurance premiums benefits both employers and their employees.

What are the rules for Section 125?

The rules in IRS Section 125 require each cafeteria plan to be governed by a written plan document. Plans are only allowed to offer certain benefits. Plans have to pass non-discrimination tests and follow compliance rules about things like notifications. Rules allow for several types of cafeteria plans.

What are the types of Section 125 plans?

The three basic forms of Section 125 plans are: Premium Only Plan; Flexible Spending Account; and Full Cafeteria Plan.

What are the benefits of Section 125?

A Section 125 Plan provides flexibility. Employers decide the types of benefits they want to include, such as medical, dental, and vision care. They can also provide spending accounts that workers can use to pay medical and child care expenses.

What is a section 125 cafeteria plan?

Premium Only Plan (POP) Employers may deduct the employee’s portion of the company-sponsored insurance premium directly from said employee’s paycheck before taxes are deducted.