Section 125 & 129 Administration (Cafeteria Plan)

Beginning in 1987 we started implementation and administration of these tax qualified plans. Today companies are under tremendous pressure to reduce costs and boost earnings. As an employer, you are very aware that employees are not only your most valuable resource, but also your most expensive resource-and that employee benefits are a major component of that cost. Now, however, there is an effective way for you to manage employee benefits costs while satisfying a broader range of employee needs. Consider Flexible Benefits, a concept that allows you to:

Meet the needs of a diverse workforce- No single benefit program can meet the needs of each employee. Female employees from two-income households have very different benefit needs than traditional male "breadwinners". Flexible Benefits let you satisfy both groups, and everyone in between. Attract and retain better employees- A recent national survey has shown that, all other things being equal, a potential employee is much more likely to choose the firm with a flexible benefits program over one with conventional fixed benefits. Employees are also less likely to change jobs for a lesser benefits program. Control escalating benefit costs- Benefit costs are rising annually and the pressure to provide better benefits continues to grow. Flexible Benefits can get you out of the spiral.

A Cafeteria Plan

How the Plan Works
The essence of a Cafeteria Plan (SEC. 125 IRC) is that it permits each participating employee to choose among two or more benefits. The ability of participating employees, on an individual basis, to select benefits fitting their own needs, allows for a greater appreciation of employee benefits offered, and in effect, decreases individual tax liability and increases "take home" pay. In addition, the employer saves payroll taxes on the amounts the employee foregoes as taxable compensation.

Benefits Offered
Some plans involve merely a choice between cash and a single non-taxable benefits; others offer a large number of benefits. The most common benefits available can be Group Life, Medical, Dental, Vision, Disability and Dependent Day Care.

Reimbursement Accounts
Under these plans, cash that is foregone by an employee, by means of a salary reduction agreement, is credited to a bookkeeping account maintained by the record keeper and drawn upon by the employer to reimburse the employee for uninsured Medical or Dental expenses or for Dependent Day Care expenses.

Tax Advantages
Under a Cafeteria plan that satisfies the requirements of Section 125, amounts contributed by the employer on behalf of the employee towards a taxable benefit will be non-taxable for Federal, State and FICA tax purposes, even through the employee could have elected to receive those amounts in cash. In addition, any amounts contributed by an employer on behalf of the employee will reduce the employer payroll tax wage base for FICA, Workman's Compensation premiums, and Unemployment Tax premiums.

Use It or Lose It
Section 125 clearly states that there must be some element of risk involved on behalf of the employee, thus the "use it or lose it " rule applies. If the employee fails to use up the allocated salary reduction during the year, any balance is forfeited by the employee and reverts back to the employer in the form of income.

Discrimination Rules
The non- discrimination rules of Section 125 are intended to insure that the non-taxable benefits under a Cafeteria plan are provided to lower paid employees as well as higher paid employees. Section 125 (b) (2) applies if the key employees exceed 25% of the aggregate of such benefits provided for all employees under the plan. Properly arranged, a Cafeteria plan can be very important additional ingredient in your over all Employee Benefit Program. This is especially true if it is combined with the 401 (k) plan.

Premium Only Plan (P.O.P.)

I.R.S. Approved Way To Reduce Taxes

Increase Your Bottom Line

Increase Employee Income At No Cost To You!

A Win/Win Situation
Your company can implement a tax qualified plan, sometimes known as a Premium Only Plan, which was created through Section 125 of the Internal Revenue Code. The P.O.P. allows employees to be given a salary reduction option whereby their health care premiums may be paid with per-tax dollars rather then after-tax dollars. This type of plan can be very advantageous to an employee. With P.O.P., tax withholding decreases while spendable income goes up.

The Objectives Of A P.O.P. Are:
To provide a means for a company to take advantage of current tax laws that will result in saving benefit dollars.
To foster greater employee appreciation for the overall employee benefit plan that is being provided.
To provide a vehicle for employees to pay premium expenses with pre-tax dollars without changing either the quality or quantity of service.
To increase spendable income of employees with eligible deductions.

How Do I Implement The Section 125 Premium Only Plan?
Flex Benefits and Administration will provide a no obligation quote on cost and tax savings.
If implemented, Flex Benefits and Administration Services:

• Legal Documents- Designed by Legal Counsel
• P.O.P. Announcements Letters
• Salary Reductions Agreements/ Waiver
• Revenue Form 5500 Advice

Group Insurance

Introduction
We provide independent, knowledgeable assistance to you in the designing and implementation of your employee benefit plans. Each program is designed to individual specifications and recommendations are based on the desires and objectives of your firm. Complete flexibility and individuality are key factors in the plans we offer.

Following are the three services we offer to your firm:

1. Study and Design of Group Health, Life and Disability needs.
   • Collection of date concerning the Company, its employees, and existing benefit plans.
   • Analysis of data to develop bid requirements.
   • Design of plan to meet specific requirements of the company including such factors as eligibility requirements, cost containment, deductible and co-insurance levels, stop loss and benefits provided.
   • Conference with company officials to discuss alternative delivery systems, i.e., fee for service, HMO, Self-Funding, Managed Care, and PPO.
   • Discussion in regards to alternative funding.
2. Installation of your Plan.
   • Preparation and explanation by personalized computer spread sheets, summarizing and comparing costs and benefits.
   • Assistance in adoption of the plan in areas as enrollment, eligibility and plan documents.
   • Communication of plan to Employees-including employee meetings, summary plan descriptions and booklets.
   • Complete review with the company administrator of the insurance contract and administration kit.
3. Annual Consulting and Administration.
   • Annual analysis of the plan to determine if it is meeting the desired objectives.
   • Training with the company to assure proper administration in areas of enrollment, temporary lay-offs, pre-existing conditions, discrimination rules and other areas.
   • Recommending and analyzing tax savings as they relate to benefit programs.
   • Providing continued service in areas of claims complaints and new laws as they relate to company plans.
   • An annual meeting with the employees to explain and answer questions on the operation of the plan, so that each employee may have a full understanding of the related plan benefits.