Employers: Update Your Section 125 Premium Only Plan Now
The IRS and the Department of Labor require employers to establish a formal plan document and summary plan description before they allow their employees to pretax insurance premium. The beginning of a new tax year is historically when most employers update or start a new Section 125 Premium Only Plan year.
Bradenton, FL (PRWEB) November 22, 2006 -- Section 125 Premium Only Plans allow employees to pretax or avoid paying income taxes on their portion of employer sponsored health insurance plans. January marks the beginning of a new Section 125 plan year for most employers.
If a company takes advantage of Section 125 pretax deductions it might want to verify that it actually does have a current Section 125 Plan Document. It's not unusual for employers to take Section 125 insurance deductions for years without knowing that a formal plan document and summary plan description are required by the IRS and Department of Labor.
Unfortunately, employers who end up in an IRS audit without a current Section 125 plan document will learn the hard way that all their insurance deductions could be reclassified back to taxable income. The IRS could then assess and add interest and penalties on the unpaid taxes.
Many more employers have Section 125 Plan Documents that have never been updated. These employers are making administrative decisions based on outdated tax law and could be allowing events that would disallow their plan. If your Section 125 Plan Document hasn't been updated since 2002 you should seriously consider updating it this January. Also, the Department of Labor requires employers to distribute new summary plan descriptions to employees once every five years.
If your Section 125 Plan Document is old, outdated or missing, the New Year would be a good time to look into updating or replacing your existing Plan.
In a recent interview with Gene Ennis, the President of Core Documents, a company that specializes in providing employers with affordable Section 125 plan document packages, we asked: "How much does it cost to update or replace an old Section 125 plan?" Mr. Ennis informed us that an employer can either amend or replace their Section 125 plan document for just $99 plus $15 shipping and handling. The $114 package consists of a one inch ring-bound notebook, a Resolution to Adopt the Plan, a 29 page Plan Document, a 16 page Summary Plan Description, all new Administration and Election Forms, and a complete Administrative Guide including non-discrimination testing forms.
If you're interested in updating, replacing or starting a new Section 125 Premium Only Plan we recommend Core Documents at www.CoreDocuments.com or call them at 1-888-755-3373.
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