Segment 125 Flexible Benefit Plans

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Segment 125 Flexible Benefit Plans Linda Meyerhoffer, CPA Benefit Solutions, Inc. linda@yourflex.com 804-379-0909

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Flexible Benefit Plan An yearly program that permits representatives to set aside cash out of every paycheck pre-duty to pay for restorative and ward mind costs they would ordinarily pay for out-of-pocket at any rate. NET EFFECT=MORE TAKE HOME PAY

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What's Are The Advantages? To Employees: Reduction of Federal, State & FICA Taxes Opportunity to pick benefits they really need

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What Are The Advantages? To the Employer: Matching FICA & FUTA Tax Savings A cheap approach to add another advantage An approach to expand worker pay without giving a raise Higher representative attention to profit costs

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Benefits Allowed Health Related Insurance - Health, Dental, Vision, AD&D, STD & LTD, Group Term Life Medical Reimbursement Account Dependent Care Assistance Program Private Health Premiums

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Benefits That Can Not Be Offered Qualified Scholarships Educational Assistance Programs Dependent Group Term Life Insurance Medical Savings Accounts Long-Term Care Insurance

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What To Offer? POP Plan - Premium Only Typical Flexible Benefit Plan Full Flexible Benefit Plan with Benefit Credits

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Medical Reimbursement Account Maximum and Minimum Annual Amounts are Determined by Company Employees Can Use to Pay Medical Expenses not Covered By Insurance Benefits Employees and their Dependents

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Employee makes decision before start of year Employer removes same sum from check pre-assess every payday When administrations are given, representative must submit repayment shape alongside verification administrations were gotten Uniform Coverage Rule Required - Employee gets repaid from his record up to the measure of his race - paying little respect to whether he has enough cash in his acct How Does Medical Reimbursement Work?

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Doctor & Prescription Co-pays Eye Care – Glasses, Contacts, Lasik Dental Care – Check-ups, Crowns, Bridges, Dentures, Orthodontics Anything pharmaceutical you would regularly take for an affliction or sickness including OTC Much More What Medical Expenses Can be Reimbursed?

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Employee makes race before start of year Employer removes same sum from check pre-impose every payday When administrations are given and paid , representative must submit repayment frame alongside evidence administrations were gotten and paid Employee gets repaid from his record up to the measure of cash in his acct How Does Dependent Care Reimbursement Work?

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New 2 ½ month Rule (Optional): Allows representatives to make buys or get therapeutic or ward mind administrations 2 ½ months into next arrangement year (14 ½ months to get administrations) Will most likely require expansion of run-out period Requires more work on manager's part Provides more adaptability for representatives Use-It or Loose-It Rule

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Ways to Compensate: Take time to assess precisely & be traditionalist Periodic Reminder Letters Re-enlistment Sessions Include Balances on check stubs 24-hour Internet get to Use-It or Loose-It Rule

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To the Employee: Could lessen future Social Security Benefits Does not decrease earned wage for calculation of the EIC Disadvantages

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To the Employer: Takes monetary hazard under the "uniform scope administer" Administration Fees Discrimination testing must be done Medical Reimbursement is a wellbeing arrangement and may must be offered under COBRA Disadvantages

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Plan Document - must be accessible upon demand by DOL and a duplicate of Summary Plan Description must go to representatives Discrimination Testing Form 5500, if required Setting Up A Plan

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Plan Document - POP or FSA? Extra archive or connection required for medicinal repayment and ward mind repayment Must be formally received by Employer before start of plan year Setting Up A Plan

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Plan Document Must Describe Eligibility Class of Employee or # of Hours Service Requirements Plan Entry Date Setting Up A Plan

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Plan Document Must Also Specify What Benefits Can Be Elected How the Plan is Funded Maximum and Minimum Contribution Amt Plan Year Rules Governing Method, Timing, & Irrevocability of Elections Setting Up A Plan

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Self-utilized people Partners in an organization A 2% or More Shareholder in a S Corp or their companion, kids, grandchildren or guardians Outside Directors, Limited Partners, and Members in LLC's Who Can Not Participate?

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Who Is Highly Compensated? An officer, or a more than 5% proprietor this year or last (counting their life partner, guardians, kids & grandchildren), or Compensation in overabundance of $95,000, or A mate or ward of any of the above. Separation Testing

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Who Is A Key Employee? An officer - yearly remuneration surpassing $135,000 or a more noteworthy 5% proprietor this year or last (counting their life partner, guardians, kids & grandchildren), or a more prominent than 1% proprietor w/pay more prominent than $150,000. Separation Testing

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Do Before the End of the Plan Year 25% Test - benefits gave to key representatives can not surpass 25% of the total of such advantages accommodated all workers under the arrangement 55% Test - for ward mind just the normal advantages gave to non-HCE's must be no less than 55% of the normal advantages gave to HCE's Other Considerations: controlled gatherings, classes of representatives, Discrimination Testing

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Must Be Completed and Submitted inside 7 months after the end of the arrangement year on the off chance that you have at least 100 members in Medical Reimbursement Penalty is $25/day up to a most extreme $15,000/return IRS Form 5500

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Consider an outside overseer Set up plan to incorporate classes of workers with low turnover – can confine in view of number of hours and have holding up pd Set up plan that repays week by week Communicate & teach representatives Support the arrangement in-house and urge cooperation Keys To A Successful Plan

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Limits managerial bother – HIPAA More protection - energizes interest Avoids claims Benefits of Using Outside Administrators

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A WIN-WIN SITUATION FOR EVERYONE Flexible Spending Accounts

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