Section 125 Cafeteria Plans

§ 125 Cafeteria Plans

In addition to providing consulting and administrative services to retirement plans, Benefit Systems, Inc. is also a leading administrator of Section 125 Cafeteria Plans. We provide employers and employees with an excellent tax savings program and benefits plan available in today’s marketplace.

What is a § 125 cafeteria plan? A cafeteria plan is a welfare plan specifically authorized by Section 125 of the Internal Revenue Code. It is a way of providing employees with valuable benefits – where both the employer and employees save significant amounts on taxes. Allowable benefits include dependent care assistance programs (day care), uninsured medical expenses not covered by the typical group medical plan, group life and disability premiums otherwise paid by the employee, and contributions to 401(k) plans.

How does a cafeteria plan work? Each employee selects the benefits he wants from the cafeteria plan menu. The employee “pays for” these benefits by electing to redirect his salary in an amount sufficient to pay for each benefit. Most importantly to each employee, these amounts are redirected from the employee’s salary before it is subject to Federal income taxes or Social Security taxes (FICA).

The redirected amounts are placed into a separate spending account for each benefit elected by the employee. Then as each employee incurs a qualifying expense (e.g., a day care bill), he submits a claim to Benefit Systems. The claim is processed and the employee is reimbursed from the money in the cafeteria plan.

ELIGIBLE BENEFITS?

Insured Benefits	Non-Insured Benefits

Accident and Health Insurance	Dependent Care Assistance (Day Care)
Group Term Life Insurance	Medical Reimbursement (for non-insured medical expenses)
Disability Insurance
Dental Insurance
Vision Insurance

COMPLIANCE?

Your § 125 plan will be afforded special tax treatment as long as it maintains a qualified status. In order to remain qualified, your plan must meet a host of requirements set by the Internal Revenue Service and the Department of Labor. The stipulations cover the areas of minimum coverage and minimum participation, eligible expenses, non-discrimination, top-heavy status, contribution limits, and taxation.

We take pride in our expertise and constantly keep abreast of current legislation. We keep you informed of the changes in the laws affecting cafeteria plans in order that your plan maintains its qualified status.

Our services satisfy annual reporting requirements, participant disclosure requirements, document and amendment essentials, annual non-discrimination and coverage testing, and other various qualification fundamentals.

SERVICES?

Plan design and document preparation

Determine goals and design of the plan
Draft Plan Document based on plan design

Compliance and consulting services

Provide administrative manual to plan administrator
Answer questions and provide assistance as needed
Provide legislative/compliance updates
Review the plan and recommend changes if needed

Employee communications and services

Prepare Summary Plan Description (SPD)
Draft an announcement letter
Prepare an employee enrollment handout and forms
Hold educational employee enrollment meetings
Prepare quarterly participant statements

Administration and bookkeeping

Process contribution information each payroll
Process claims within 1 business day after all required documents are submitted
Produce checks
Perform non-discrimination testing
Prepare annual government forms filing package

Effective immediately Benefit Sytems, Inc. has enhanced our Section 125 Plan services to include Automatic Deposit for claims payments for both the Medical Reimbursement and Dependent Care Reimbursement accounts. Participants can now choose to have their claims reimbursements deposited directly into their checking or savings accounts.

The Explanation of Benefits that accompanies the checks mailed to participants will be sent via email to the address provided to us by the participants. The account deposit will be placed in the participant's account within 2-3 business days after the date of receipt.

The new Automatic Deposit form and revised claim forms are found on the forms page. The information regarding the new service and supplies of the forms will be included for the clients and the participants on the next quarterly report.

To initiate the Automatic Deposit, participants will need to complete the Automatic Deposit form and fax or mail to our office with a copy of a voided check.

If you have any questions, please do not hesitate to contact our office.

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