Discussion:Section 125 Cafeteria Plans
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Discussion Forum Index --> Tax Questions --> Section 125 Cafeteria Plans
Mikespinner (talk|edits) said: | 28 October 2006 |
| How does an employer set up a Section 125 Cafe plan for health insurance? Is there a certain form that needs to be filed with the IRS? | |
| 28 October 2006 | |
| Sec. 125. Reg. 1.125-2T. | |
| 28 December 2006 | |
| What tax code defines eligible expenses to which the employer may apply any forfeited Flexible Spending Account funds? I understand that administrative costs of the FSA plan are eligible and perhaps even any future employee benefits One more reasonable option is distribution (evenly or pro-rata) to all employees per IRS Notice 2005-42. | |
| 28 December 2006 | |
| If health insurance is the only benefit of the cafe plan, I don't think that you need one. The employer can pay for this insurance as a benefit, without a cafe plan. Also check out HSA. They may work better for the employees. | |
| 13 January 2007 | |
| Hi everyone,
Does a small non-profit library with only one paid employee need to set up a Premium Only Plan (Section 125 Cafeteria Plan) in order to make a pretax deduction from gross salary for employee's partial contribution to health insurance premiums? Your comments would be appreciated. Tom | |
| 13 January 2007 | |
| Yes. Without an official 125 plan, the health ins is paid with after tax dollars.
If health ins is the only item the employer will allow in a 125 plan it must be set up. Otherwise the premiums are paid for with after tax dollars. They can also include things like medical expenses, child and dependant care. Depends upon the employer. | |
| 26 January 2007 | |
| www.coredocuments.com
I have established a few cafeteria plans for clients in the past and have used the above company to prepare all the filings required. The product they spit out is great. you can do it quickly and inexpensively and then mark it up for the client, or you can just refer your client to this site. All pre-tax plans must be written, whether it is a premium only plan or a full fledged cafeteria plan. I did get out of this market a few years ago due to the complexity of the regulations and the constant need to stay up to date on this. I am in the process of getting back into it only because of the availability of internet site like the one above. I do also have a strong HR background and wouldn't recommend just adding this area to your practice unless you really understand how section 125 plans work and how they need to be admiistered. If you mess up, it's a great way to really piss off a client. Many different things to consider. Many people shy away from using the plan because of the use it or lose it rule. Education of the employees is the way to get around this. Also, employers are not required to keep forfeited funds at the end of the year. They may return this money to the employees, albeit, not dollar for dollar. the employer is allowed to contribute these funds to next years section 125 plan, or to reimburse all employees enrolled in the plan in an equitable manner <e.g. not dollar for dollar>. also, another great option to add to the plan is vacation days. You can allow employees to purchase addtional vacation days that they may then use. It's an awesome way to offer additional benefit while reducing your costs. especially if the employee still has to get out the same amount of work. not many people know about the vacation day part. Employees love it and depending on the employers type of business, if it can be incorporated they love it too. | |
Cafeteria-Plan (talk|edits) said: | 23 March 2007 |
| spam removed | |
| 23 March 2007 | |
| Can someone determine whether this last post is SPAM? the user just registered to make this post, and the user name sounds spammy. | |
| 24 March 2007 | |
| Nothing wrong with SPAM Kevin......the canned edible kind of course!
| |
| 24 March 2007 | |
| It is probably an ad for a cafeteria plan site, but if it's a good site and pertinent to the conversation, then why delete it. I personally use coredocuments.com to set up all sec 125 p-lans for my clients, and have never heard of this other one, but it's not unrelated to the post. let it stay, might be useful | |
| 24 March 2007 | |
| FS, I normally agree, but in order to get any information from the link, you have to provide your contact info and email, which leads me to believe it is a sales pitch and not general information that the rest of us would find useful. If Cafeteria-Plan wanted to post useful info, he could have done that very easily. He didn't. | |
| 24 March 2007 | |
| I HATE people like that. Wish there was a way that they could screen us a little better -- i.e. you actually Have to either be currently doing taxes, have done taxes, or going to college and need to do research on accounting and taxes to sign up here. It would make it a lot easier...I don't mind silly questions from those of us who have been in the business or are in it (gives me a laugh everyonce in while -- and it does make me stop and think about what I do in that situation). But I don't like the one time joes that come in and want advice from us for FREE!!! They are too cheap to go to the local office, so they want us to provide the answer I've gotten to the point where I ignore them...Just peachy...sorry done with my rant now...gotta get back to the lady with the moving expenses that thinks that she should be able to deduct every trip to McDonalds at every stop that she made in the town while looking for a new place of residence... | |
| 24 August 2007 | |
| Is a section 125 contribution expempt from Fica and FUTA? | |
TheTinCook (talk|edits) said: | 24 August 2007 |
| Nope. | |
| August 24, 2007 | |
| Nschnider, what do you mean by "section 125 contribution"?
And why is that post from Cafeteria Plan still there? Is that allowable? | |
| 25 August 2007 | |
| Natalie,
in the 125 plan the ee gives up income to put into the basket, tax exempt, and is not taxed for income purposes. My questions is the deferal also exempt from FICA and FUTA | |
TheTinCook (talk|edits) said: | 25 August 2007 |
| Allow me to correct myself...
Usually heath deferals in a sec 125 plan are excluded from FICA and FUTA but only to the extent provided in the plan. In addition a deferral for coverage for a domestic partner is always taxable. There are probally other exceptions out there. There are also quite a few states that do not follow federal rules for sec 125 plans. | |
| August 28, 2007 | |
| Nshnider, it sounds like you may be talking about the customary medical out of pocket expenses and dependent child care. Sec. 125 plans generally exempt these types of benefits from FICA, medicare, FUTA and income taxes. You should take a look at www.irs.gov however for additional information if you are referring to adoption benefits, group-term life insurance or something else. | |
Thirdpartyadministrator (talk|edits) said: | 12 September 2008 |
| I am dealing with a non-profit hospital that wants to set up a Section 125 plan for its employees. However since the non-profit will not save on FICA taxes (employees are on public employee retirement system), the hospital wants to charge participating employees an additional contribution amount in excess of the employee's own elected salary reduction to be applied toward payment of plan administration expenses. This additional contribution would not be reimbursable to employees as a plan benefit since it would be applied toward the administrative cost of coverage. My initial reaction is that charging such a contribution to employees would not be against regulations, but I have not had experience with any other client that suggested charging employees for participation in a Section 125 plan. Has anyone had experience with an employer charging such a contribution? | |
| September 12, 2008 | |
| Usually when my clients want to charge fees or reimbursements, we look at how much would be charged vs. the cost of administering those charges (cost/benefit analysis). Many times it turns out it is not worth the extra work.
Has your client done that? | |
