If you still haven't augmented your company's benefits program with a Section 125 Premium-Only Plan, you are missing out on substantial cost savings - and so are your employees.
With a Section 125 Plan, health plans are on a "menu", hence it is also called a cafeteria plan. You probably already know that a cafeteria plan allows employees to pick out from a range of benefit choices, such as health, dental, vision, or disability insurance, and the premiums will be paid for via payroll deduction. But you may not know the cafeteria plan's biggest benefit ? its tax-advantaged status.
With the contributions withheld on a pre-tax basis, the employee's taxable income decreases. Consequently, this translates to lesser FICA and Medicare taxes for the workers. The lower taxable income also means lower payroll taxes for you, the employer. FUTA taxes and state payroll taxes could also be cut down. Depending on the employees personal tax bracket many participants see tax savings of up to 49-50% on premiums run through the Section 125 plan. For employers, average savings is about 8.45% for FICA and FUTA taxes. This may increase if your state and county tax savings, and workers' compensation premiums provide for higher allocation.
Don't Let Compliance Requirements Scare You
Even if you know the potential benefits of a Section 125 POP plan, you might have chosen not to establish one because of fear of the IRS. Yes, it's true that IRS rules for cafeteria plans are complex, but following them doesn't have to be difficult if you use a professional service.
A reliable cafeteria plan compliance advisor can generate plan documents customized for your business that you can use immediately. They'll retain an electronic copy of these documents, too, so these will always be available if you need them. Some services also offer guides that outline the mandatory steps that need to be followed once the plan document is complete. Other than indepth instructions, some professional services will also give you a software that makes it easy to comply with nondiscrimination testing which is required every year. Best of all, you don't have to burden your employees with the work of staying up-to-date with IRS rules. Whenever there's a change you need to know about, experienced tax advisors update your document and send signature ready amendments.
So what is there to worry about Section 125 compliance? You're covered if you seek assistance from the right people.
With a Section 125 Plan, health plans are on a "menu", hence it is also called a cafeteria plan. You probably already know that a cafeteria plan allows employees to pick out from a range of benefit choices, such as health, dental, vision, or disability insurance, and the premiums will be paid for via payroll deduction. But you may not know the cafeteria plan's biggest benefit ? its tax-advantaged status.
With the contributions withheld on a pre-tax basis, the employee's taxable income decreases. Consequently, this translates to lesser FICA and Medicare taxes for the workers. The lower taxable income also means lower payroll taxes for you, the employer. FUTA taxes and state payroll taxes could also be cut down. Depending on the employees personal tax bracket many participants see tax savings of up to 49-50% on premiums run through the Section 125 plan. For employers, average savings is about 8.45% for FICA and FUTA taxes. This may increase if your state and county tax savings, and workers' compensation premiums provide for higher allocation.
Don't Let Compliance Requirements Scare You
Even if you know the potential benefits of a Section 125 POP plan, you might have chosen not to establish one because of fear of the IRS. Yes, it's true that IRS rules for cafeteria plans are complex, but following them doesn't have to be difficult if you use a professional service.
A reliable cafeteria plan compliance advisor can generate plan documents customized for your business that you can use immediately. They'll retain an electronic copy of these documents, too, so these will always be available if you need them. Some services also offer guides that outline the mandatory steps that need to be followed once the plan document is complete. Other than indepth instructions, some professional services will also give you a software that makes it easy to comply with nondiscrimination testing which is required every year. Best of all, you don't have to burden your employees with the work of staying up-to-date with IRS rules. Whenever there's a change you need to know about, experienced tax advisors update your document and send signature ready amendments.
So what is there to worry about Section 125 compliance? You're covered if you seek assistance from the right people.
About the Author:
It's time to give your employees the benefits they can really use, and give your company cost savings in the process! Best of all, this expertise and support for your Section 125 Plan is available to you for just $99 a year! Drop by at http://taxfreepremiums.com to discover just how much tax savings you can realize.