Section 125 Administration

What is the Premium Only Plan?

The Premium Only Plan is a fringe benefit plan, which is authorized under the I.R.S. code Section 125. It is a tax reduction plan, not an insurance plan. The Premium Only Plan allows employees to pay for their portion of benefit plan costs on a before tax basis.

What can we expect to save with this plan?

On average, the employee savings will be approximately 30% and employer savings 7.65% of the employee contributions for benefits.

Do we need a lot of employees in order to benefit?

No. The tax savings are created by the employee’s contributions for insurance. As long as the plan does not favor key executives and owners, there is no minimum number of employees necessary in order to have a plan.

Which employees are eligible for the plan?

All employees that you, the employer declare eligible. If you allow part time employees to participate, you must allow all part time employees to participate. The business owner may also participate if the owner is actually considered an employee by the corporation.

What are the benefits of the Premium Only Plan?

Generally, employers will payroll deduct an employees portion of the benefit plan costs right out of his or her paycheck. The benefit cost is deducted AFTER taxes have been taken out of the employee's paycheck. The Premium Only plan makes it possible for the benefit costs to come off the top on a BEFORE TAX basis. What this means is that LESS taxes are taken out of the employee's paycheck. Less taxes means MORE MONEY in the employee's paycheck.

Does the company have to have a certain insurance carrier?

No. It does not matter where or what medical benefits are available to you. It only matters that the employee is paying for some portion of their benefits.

Must all employees participate?

No. Only those employees who have premiums for which they would like to save on taxes should consider participation.

When can my plan begin?

As soon as you decide to begin saving for yourself and your employees.

Dependent Care & Flexible Spending Account

What is the Flexible Spending Account?

The Flexible Spending Account is a fringe benefit plan, which is authorized under the I.R.S. code Section 125. It is a tax reduction plan, not an insurance plan. The Flexible Spending Account allows employees to pay for their entire portion of out of pocket medical expenses on a before tax basis.

What is the Dependent Care Account?

The Dependent Care Account is a fringe benefit plan, which is authorized under the I.R.S. code Section 125. It is a tax reduction plan, not an insurance plan. The Dependent Care Account allows employees to pay for all of their child care expenses on a before tax basis.

What can we expect to save with these plans?

On average, the employee savings will be approximately 30% and employer savings 7.65% of the employee contributions for benefits.

Can we implement only one plan without the other?

Yes, the Dependent Care Account can be implemented by itself or in conjunction with POP and FSA. However, a Flexible Account when installed can include FSA and POP.

Do we need a lot of employees in order to benefit?

No. The tax savings are created by employee contributions. As long as the plan does not favor key executives and owners, there is no minimum number of employees necessary in order to have a plan.

What are the benefits of implementing either of these plans?

Since you are reducing an employees gross pay check, you then are giving that employee a raise to their income. This will help retain and hire better quality employees for the employer. You now are able to offer benefits that were once only affordable to the larger size corporations.

Is it required for employees to purchase medical coverage in order to participate?

No. If an employee has coverage elsewhere, he/she may either decline to participate or may participate in any pretax benefits.

If I am enrolled in my spouse's Cafeteria Plan, can I also enroll with my current employer?

Yes. An employee who is married may participate in both plans.

When can my plan begin?

As soon as you decide to begin saving for yourself and your employees.