Section 125 Plan
You might have heard about section 125 plan but do you know about it? An insurance group has offered a benefit to its employee that is known as section 125 plans. It has other names like mini-flexi plan, cafeteria plans and flexible benefit plans. These plans come into existence in1978 but have no popularity that time. Later in 1986, employees were given large profits with the tax benefits. This plan is launched with the aim of letting the employers to set up distinct plan for their employees. This renders them with many benefits on pretax.
The section 125 plan are strictly designed by meeting the IRS norms. It should meet the definite requirements that can be change. The written plan should be well designed that illustrate every benefit and make necessary rules for the eligibility required during the election. This is a good plan designed that has helped employee in getting health care benefits. It allows the employees to take decision of what all benefits they want to include in their plan. This plan allows the employee to include the pretax into the plan. This contribution does not subject any taxes.
The employee could use this plan to pay their expenses like medical supplies, heath insurance premiums etc. This gives benefits to the employees as no money in being added in their gross income, they are liable to save up to 27 % to 50%. It is beneficial for the smaller employees as they are paying a part of the benefits premium. Yet the employees are able to enjoy several more benefits. As the employee compensation is designed based on their payroll size, the deduction in their payroll leads to educed workers compensation premiums. There are several health insurance companies present that offer you with the wide range of choices to choose a plan that better suits your requirements.
In Massachusetts some plans have been partnered with the state and state mandates, still the employees are able to save money by following the section 125 plan as the administrative cost are compensate by FICA savings. To know more about the plan ask your company insurance and health care professional about any part of the plan that would work for your company profits. The section 125 plan saves tax of the employees by lowering down their medical premiums.
This section 125 plan runs once in a year. At the beginning the participant has to choose how much amount they will contribute in the plan. However, they have two spending accounts. The first one is for them known as the Health Care account and the second one is for their dependents which are known as Dependent Care Account. Both the account is considered separately. One could not be able to transfer money from one account to another.