If you offer health insurance benefits paid through pretax payroll deductions, your company needs an official Section 125 plan document to maintain compliance with IRS regulations.
For our ConnectPay clients, our Connect Section 125 Plan Document provides a quick, easy, and affordable way to get a comprehensive, customized solution. Our experts will ensure your plan meets all federal requirements, so you can confidently offer pre tax benefits while minimizing compliance risks.
A Section 125 Plan Document is a written plan that allows companies to offer their employees tax-advantaged benefits in a compliant manner. It is required by Section 125 of the Internal Revenue Code.
Essentially, it certifies that your organization has an approved "cafeteria plan" in place. A cafeteria plan gives employees the ability to pay for qualified benefits like health, dental, and vision insurance premiums using pretax dollars deducted from their paycheck.
By paying for these employer-sponsored benefits on a pretax basis, it reduces the employee's taxable income. This means they end up owning less in taxes, effectively making the benefits more affordable. Employers also save by paying less in payroll taxes on the pretax deductions.
Here are the most common questions (and answers) we're asked by small businesses about Section 125 Plan Documents.
The good news is that Section 125 plans are designed to be accessible to businesses of all sizes! The IRS lays out minimal eligibility requirements, making them a viable option for most businesses. Here's a breakdown of who can offer and participate in a Section 125 plan:
Eligible Employers:
Eligible Employees:
Who is Not Eligible?
There are very few limitations on eligibility for Section 125 plans. However, a couple of scenarios can exclude participation:
Remember: It's always advisable to consult with a tax professional to confirm your specific eligibility for a Section 125 plan. They can address any unique circumstances your business may have.
The good news is that getting a Section 125 plan document in place for your business can be a swift and straightforward process, especially when you partner with ConnectPay. Here's why:
In many cases, ConnectPay can have your Section 125 plan document finalized and ready to use within 7-10 days. This means you can start offering your employees the tax-saving benefits of a Section 125 plan quickly and efficiently.
There's no denying that insurance brokers offer valuable guidance on employee benefits. However, when it comes to Section 125 plan documents specifically, payroll providers like ConnectPay hold a distinct advantage.
Streamlined Integration: Payroll is what we do best, and Section 125 plans become a seamless extension of that expertise. Our plan documents integrate effortlessly with your existing payroll system, eliminating the need for complex workarounds or separate software. This translates to:
Focus on Payroll, Not Paperwork: Choosing ConnectPay frees you from the burden of managing complex paperwork and calculations associated with Section 125 plans. We handle the heavy lifting, allowing you to focus on what matters most – running your business.
Cost-Effective Solutions: We understand that cost is a major concern. ConnectPay offers competitive pricing on Section 125 plan documents, and our integrated approach can potentially save you time and money compared to working with separate providers for payroll and Section 125 administration.
No, ConnectPay does not offer health insurance plans. Local insurance brokers are best suited to assist you with your businesses health plan needs. We offer the documentation to stay in compliance when offering pre tax benefits through payroll to your employees.
Yes, it is a Section 125 Plan--which means you also need that Section 125 Plan Document! Section 125 plans are sometimes called cafeteria plans. That's because they offer a wide range of pre tax benefits that your employees can pick and choose from depending on their needs--kind of like you would while picking out lunch at a cafeteria!
Use these links to learn more:
Want to learn more? Read through our blogs for a better understanding of Section 125 Plans.