SECTION 125 Premium Only Plan (POP): IRS Section 125 Premium Only Plans were introduced by the Revenue Act of 1978. These plans allow employers to reduce payroll taxes by making one simple adjustment to the payroll process. Under a Section 125 Premium Only Plan employees elect to pay their portion of health insurance premiums on a pre-tax or tax-free basis rather than on an after-tax basis. This creates savings for both the employee and the employer.
How Employees Benefit from a Premium Only Plan: Employees save 20 to 40% of their pre-tax Section 125 premium deductions. The tax savings are on city, state, and federal income taxes, including Social Security and Medicare taxes on money used to pay for their portion of insurance premiums. Employees take-home pay is increased which helps reduce the cost of providing health coverage for family members.
How Employers Benefit from a Premium Only Plan: Employers benefit by reducing the matching Social Security and Medicare taxes, and sometimes Federal and State unemployment taxes. Depending on the state, employers may also be eligible for worker's compensation savings.
Who Can Participate: Employees of regular corporations, S corporations, limited liability companies (LLCs), partnerships, sole proprietors, professional corporations, and not-for-profits can all reduce payroll taxes by establishing a Section 125 Premium Only Plan. While the Code prohibits a sole proprietor, partner, members of an LLC (in most cases), or individuals owning more than 2% of an S corporation from participating in the Section 125 POP, owners may still benefit from the savings on payroll taxes by sponsoring the plan for their employees.
Click here to learn how to set up one of these plans for only $99 plus $15 S&H.
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Health Flexible Spending Account (FSA): A Health Flexible Spending Account allow employees to use pre-tax dollars to pay for medical bills not covered by their insurance. The Health FSA is covered by a separate Plan Document for only $149 plus $15 S&H. The Health FSA plans can also be offered in conjunction with a POP and/or a Dependent Care FSA. The FSA is a budgeting tool that can help take care of out-of-pocket expenses such as dental and optical care, insurance deductibles, co-pays, and prescription drugs. Like a POP, the FSA helps pay for itself by increasing employee take-home pay while decreasing employer payroll taxes.
Here's how it works: An employee decides how much of their salary should be set aside before taxes are calculated. This amount is automatically deducted from their paycheck every pay period, just like any other payroll deduction, and is deposited into their Health FSA account. The employees would pay their out-of-pocket expenses up-front, then submit a claim and documentation and a reimbursement is made from their own account. Out-of-pocket expenses include:
Eyeglasses and contact lenses Medical insurance deductibles
Orthodontia Chiropractic services
Dental treatments X-ray and laboratory services
The flexibility of an FSA plan makes it the best option for small to medium sized businesses.
Click here to learn how to set up one of these plans for only $149 plus $15 S&H.
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Section 125 POP With HSA Module: The HSA Savings component can be pre-taxed through a Section 125 Premium Only Plan. Section 125 Plans and HSA Savings Deduction. With more and more employers opting for High Deductible Health Plans (HDHP) and offering their employees Heath Savings Accounts (HSA), the question comes up about whether the HSA portion (savings component) qualifies as a pretax payroll deduction through the Section 125 Premium Only Plan.
We have developed a HSA module for the Section 125 Premium Only Plan that allows the HSA savings component to be pre-taxed. Employers receive everything they need to establish an HSA Section 125 for only $179.00. This package includes the Resolution to adopt, Plan Document, Summary Plan Description, Election Forms, Claim Forms, and Administrative Instructions. Flex Affiliates is available to assist you throughout the process.
Setting up a Section 125 POP with the HSA module allows business owners to save matching Social Security (FICA), as well as federal unemployment taxes (FUTA) and generally, state unemployment taxes, on the money employees contribute to their premiums as well as the HSA savings component. Employer tax savings can average 7 to 10 percent. In California and several other states the Section 125 payroll deductions reduce the threshold on which workers compensation premiums are levied for even more savings to the employer. For example, if an employee pre-taxes $5,250 into the HSA savings account, the employer will save approximately $500 in matching FICA & FUTA taxes. (These numbers are examples. A tax adviser should be consulted for information on individual state regulations.)
Employees realize savings in their FICA, federal, and, in most cases state income taxes. This is roughly a 30% tax savings. An employee who pre-taxes his HSA savings component through the POP, funds his account tax free or pretax. The alternative would be for the employee to fund the HSA savings account with after tax dollars outside the group and then write it off their taxes at the end of the year. It's a "save-as-you-go" pretax HSA payment plan. An employee who saves the HSA maximum $5,250 through the Section 125 POP reduces his or her payroll taxes by approximately $1,575. (Depending on the employee's tax bracket the savings could be more or less).
Click here to learn how to set up one of these plans for only $179 plus $15 S&H.
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Section 105 Health Reimbursement Arrangement (HRA): HRA's have been referred to by many names over the last few years such as personal savings accounts, personal care accounts, defined contribution plans, or consumer-driven health care plans.
The confusion ended in 2002, when the IRS finally issued guidelines in Notice 2002-45 and Revenue Ruling 2002-41 for employer-provided medical reimbursement accounts and called it the Health Reimbursement Arrangement, or HRA.
We provide employers with everything they need to successfully establish a HRA plan for $299 plus $15 S&H. You’ll receive a complete Plan Document required by the IRS, a Summary Plan Description for distribution to all eligible employees required by ERISA and the Department of Labor, Election and Claim Forms, Resolution to Adopt, and complete Administrative information.
Why Employers Shop For HSA Plans and Buy HRA Plans: A recent press release entitled "Why Employers Shop For HSA Plans and Buy HRA Plans" (click the link to see the article) discusses the difference between HSAs and HRA plans and why the number of HRA participants in the U.S. have outpaced HSA enrollments.
How Employers Utilize a Health Reimbursement Arrangement: (HRA) Expenses not reimbursed by health insurance are one way employer groups are utilizing HRAs. With an HRA, the employer funds an account from which the employee is reimbursed for qualified medical expenses, such as co-pays, deductibles, vision care, prescriptions, long-term care, medical insurance, chiropractic care, and most dental expenses. Over-the-counter drugs that are medically necessary may also be reimbursed through an HRA. Reimbursements from the HRA are not taxed to the employee, and are deductible by the employer.
The most common use of an HRA is in combination with a High Deductible Health Coverage (HDHC) Plan. HRAs can enhance a company's benefit package while helping to contain costs and boost employee morale. For example, you can combine your HRA with a higher-deductible health insurance plan. The employer benefits from reduced insurance costs, but the effect to the employee is cushioned with an HRA.
Click here to learn how to set up one of these plans for only $299 plus $15 S&H.
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Small Business Health Care Tax Credit: If you are a small employer (business or tax-exempt) that provides health insurance coverage to your employees, determine if you may qualify for the Small Business Health Care Tax Credit by this simple IRS Tax Credit Qualification Questionairre.For a complimentary detailed analysis, please contact Jan Sherman at The Benefits Edge, LLC
Health Savings Accounts (HSA):An account into which both employers and employees may deposit money on a tax deductible basis. This money can be used to pay for any medically related expenses including but not limited to; deductibles, copays, dental and vision plans. HSAs are only available to individuals participating in a qualified high deductible health plan."Why Employers Shop For HSA Plans and Buy HRA Plans"
is an article that discusses the difference between HSAs and HRA plans and why the number of HRA participants in the U.S. have outpaced HSA enrollments. LEARN MORE
Section125 Premium Only Plan (POP): Saves employers money on FICA taxes by allowing employees to deduct money pre-tax to pay for their contributions to their benefits. LEARN MORE
Health Flexible Spending Account (FSA): Saves employers money on FICA taxes by allowing employees to use pre-tax dollars to pay for medical bills not covered by their insurance. LEARN MORE
Section125 POP With HSA Module: With more and more employers opting for High Deductible Health Plans (HDHP) and offering their employees Heath Savings Accounts (HSA), the question comes up about whether the HSA portion (savings component) qualifies as a pretax payroll deduction through a Section 125 Premium Only Plan.LEARN MORE
Section105 Health Reimbursement Arrangement (HRA):HRAs have been referred to by many names over the last few years such as personal savings accounts, personal care accounts, defined contribution plans, or consumer-driven health care plans. The confusion ended in 2002, when the IRS finally issued guidelines in Notice 2002-45 and Revenue Ruling 2002-41 for employer-provided medical reimbursement accounts and called it the Health Reimbursement Arrangement, or HRA. LEARN MORE