Aiming to provide affordable health insurance to its residents, leaders of the state of Massachusetts took the first proactive step towards health care. That first step led to the creation of the Massachusetts Health Connector.
What Do I Have to Do? In Massachusetts, if you have 11 or more eligible employees working for your small business, you must establish a Section 125 plan and offer availability to the Connector on a pre-tax basis. But just because this move is designed to give your employees better health benefits, it doesn't mean that your company would need to spend more.
The most basic of these cafeteria plans, as Section 125 plans are also referred to, is the Section 125 POP. POP is an acronym for Premium Only Plan, and that means that your employees are allowed the ability to pay for their benefits on a pre-tax basis. The pleasant surprise for employers is that they get to realize some tax savings too.
How Is It Good for My Employees? If you implement a Section 125 POP, your employees will have the option to pick out the benefits that will be most suitable for themselves and their dependents. This is good news for employees because they need only spend for the health plan that best fits their needs. Just like in a cafeteria, the employee is presented with a menu - but this time of health care benefits - and whatever plan he chooses, the contribution is then withheld using pre-tax dollars. That means that the premium payment reduces taxable income. So, the employee has lower FICA and Medicare payroll taxes, as well as Federal and State Income Tax.
Among the health plans that the employee can select from through the Health Connector are Fallon Community Health Plan, CeltiCare, Health New England, Blue Cross Blue Shield of Massachusetts, and Tufts Health Plan, among others.
How Would This Benefit the Employer? If you're the employer, you get something out of this deal too because you'll also enjoy lower tax costs as your matching share of FICA and Medicare taxes are reduced. The lower taxable income also translates to smaller FUTA taxes, and possibly to reduce state and local taxes.
So, even though you've offered a benefit to your employees that will help them with their needs, it has the bonus of employer cost savings. Prior to the Connector unless the employer sponsored a health plan it was not possible for employees to purchase benefits through a Section 125 POP plan.
What About Compliance? All these talk about tax savings is music to the ears, but you may ask - How about compliance? While it's true that IRS Section 125 POP plans are governed by IRS rules, and there are significant steps you must follow to make sure your plan is compliant and retains its tax-preferred status, keeping abreast with the latest developments in the IRS rules is doable. The federal government has created a website where you can find a template for compliance you can easily replicate. If you or any one else in the company don't have the time to study the rules yourself, then enlist the help of professionals.
What Do I Have to Do? In Massachusetts, if you have 11 or more eligible employees working for your small business, you must establish a Section 125 plan and offer availability to the Connector on a pre-tax basis. But just because this move is designed to give your employees better health benefits, it doesn't mean that your company would need to spend more.
The most basic of these cafeteria plans, as Section 125 plans are also referred to, is the Section 125 POP. POP is an acronym for Premium Only Plan, and that means that your employees are allowed the ability to pay for their benefits on a pre-tax basis. The pleasant surprise for employers is that they get to realize some tax savings too.
How Is It Good for My Employees? If you implement a Section 125 POP, your employees will have the option to pick out the benefits that will be most suitable for themselves and their dependents. This is good news for employees because they need only spend for the health plan that best fits their needs. Just like in a cafeteria, the employee is presented with a menu - but this time of health care benefits - and whatever plan he chooses, the contribution is then withheld using pre-tax dollars. That means that the premium payment reduces taxable income. So, the employee has lower FICA and Medicare payroll taxes, as well as Federal and State Income Tax.
Among the health plans that the employee can select from through the Health Connector are Fallon Community Health Plan, CeltiCare, Health New England, Blue Cross Blue Shield of Massachusetts, and Tufts Health Plan, among others.
How Would This Benefit the Employer? If you're the employer, you get something out of this deal too because you'll also enjoy lower tax costs as your matching share of FICA and Medicare taxes are reduced. The lower taxable income also translates to smaller FUTA taxes, and possibly to reduce state and local taxes.
So, even though you've offered a benefit to your employees that will help them with their needs, it has the bonus of employer cost savings. Prior to the Connector unless the employer sponsored a health plan it was not possible for employees to purchase benefits through a Section 125 POP plan.
What About Compliance? All these talk about tax savings is music to the ears, but you may ask - How about compliance? While it's true that IRS Section 125 POP plans are governed by IRS rules, and there are significant steps you must follow to make sure your plan is compliant and retains its tax-preferred status, keeping abreast with the latest developments in the IRS rules is doable. The federal government has created a website where you can find a template for compliance you can easily replicate. If you or any one else in the company don't have the time to study the rules yourself, then enlist the help of professionals.
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If you want to know a timely and affordable way to keep in compliance with IRS policies for Section 125 plans, visit us at http://taxfreepremiums.com. You'll also learn what other Section 125 benefits there could be and how you can maximize these.