What is the American Fidelity 125 plan?
The Section 125 Plan offered through American Fidelity Assurance Company allows you to deduct needed benefits from your gross earnings before taxes are computed. What that means is that current after-tax expenses for insurance products and benefits can now be paid for with pre-tax dollars.
What is a 125 plan for insurance?
A Section 125 plan typically lets employees use pretax money to pay for health insurance premiums (medical, dental, vision). Other options include retirement deposits, supplemental life or disability insurance, Health Savings Accounts, and various medical or dependent care expenses.
What is a 125 plan on w2?
A section 125 plan is the only means by which an employer can offer employees a choice between taxable and nontaxable benefits without the choice causing the benefits to become taxable.
What is premium only 125 plan?
IRS code Section 125 allows an employer to set up a Premium Only Plan (POP), where an employee’s insurance premium contributions can be deducted from his or her payroll on a pre-tax basis. This can save employees up to 40% on income taxes and payroll taxes. The employer also saves on these taxes.
How much does a Section 125 plan cost?
The IRS requires a Section 125 Plan Document so that employees can pay for health premiums, FSA contributions, and other group benefits with tax-free payroll deductions.
Is 401k a Section 125 plan?
What other terms are used to describe a 401(k) cafeteria plan? These plans are sometimes referred to as Section 125 Plan (from the applicable IRS code) or a flexible benefits plan.
Why do I need a Section 125 plan?
125 plan is required for employers who want to allow employees to choose the qualified benefits they want and avoid paying income taxes on the amount of wages they contribute to obtain those benefits.
What are the pros and cons of cafeteria benefits program?
Pros and Cons of a Cafeteria Plan
- Pay Less Tax. Employers do not pay FICA or FUTA taxes on salary reductions amounts.
- Address Employee Needs.
- Cost Control.
- Competitive Benefit Program.
- Improve Employee-Employer Relationship.
- Respond to Work-Force Diversity.
- Better Understanding of Benefits.
Do I need a 125 plan?
IRS Requirement for pre-taxed employee benefits. If you are an employer wanting to allow your employees to pay group health and other insurance premiums with pre-tax salary deductions, the answer is yes, you need a Section 125 plan document.
Who needs a Section 125 plan?
How do I get a Section 125 plan?
To start a section 125 benefits plan, employers have to draft a document that outlines the benefits offered, contribution limits, participation rules and other information required by the IRS.
What is a disadvantage of cafeteria style plans?
Employees who exceed their allocated spending amount pay a partial premium to their employer. So if Emma spends $1,000 over her allocated contribution, she pays a portion of that amount herself. The disadvantage of a cafeteria plan is it usually takes more time to administer and is typically more complex.