Employers must have a Section 125 plan document if employees pay for benefits with pretax payroll deductions.
Further can help employers who do not have this important document set one up — free of charge.
If you want to legally deduct employee pretax contributions for healthcare and certain other types of benefits, you need what’s commonly called a Section 125 plan document.* This document is required by the Internal Revenue Code for an employer to take pretax deductions, thereby lowering taxable income, which means employees pay less in federal income, Medicare, and Social Security taxes. Pretax deductions also decrease your taxable payroll.
Examples of Section 125 plans include cafeteria plans, flexible spending accounts, and premium only plans. With a premium only plan (POP), an employee’s pretax payroll deductions can be used to cover their cost for healthcare (medical, prescription drug, dental, vision), disability, and term life benefits.
Further, the administrator of tax-advantaged accounts offered through the Board of Pensions, has offered to help employers who need a POP put one together at no cost. This free service is available to any employer offering any kind of benefit through the Board:
Complete the Premium Only Plan Employer Enrollment Form and return it to Further. If you need help completing the form or have questions about the POP, contact the Further by HealthEquity Employer Service Line at 888-460-4013, 8 a.m. to 5 p.m. CT, Monday through Friday, and tell them you work with the Board of Pensions.
Note: If you are currently deducting employees’ contributions for benefits on a pretax basis and do not have a Section 125 (premium only) plan document, you may want to consult with your tax adviser.
*If you offer a flexible spending account or health savings account through Further, you already have the required Section 125 plan document and do not need to take action.