Section 125 Plan Document Requirement

The Section 125 Plan allows employees to pay for health insurance and other eligible benefits with pre-tax dollars. Essentially, the employer offers employees the opportunity to agree to a salary deduction in exchange for the benefits. This reduces the employee’s taxable income, in effect making the health insurance and other eligible benefits tax free. Employers save, too, by reducing the overall payroll base on which FICA and other payroll taxes are calculated. Just be sure to meet the Section 125 plan document requirement so that your company’s tax-free benefits plan is IRS-, DOL-, and ACA-compliant.

Section 125 Plan Document Requirement

IRS Code, Section 125 (d) (1), sets the Section 125 plan document requirement for employers offering the option of paying for health insurance and other benefits with a pre-tax salary deduction. Here is some basic information about the plan document:

• A Section 125 plan document contains all information on the plan, including eligibility rules, benefits available, plan trustee(s) and administrator(s), and more, as needed, to properly describe the Section 125 plan in full.
• The required plan document must be in place before the first day of the plan year, when the benefits are available to employees.
• A copy of the Summary Plan Description (SPD) part of the plan must be distributed to every employee eligible to participate in the plan prior to the start of each plan year.
• The Section 125 plan document requirement does not include filing the document with any government agency, only to keep it on file and available for employee requests or in the case of an audit.

Getting your plan document

There are no rules that say you cannot do it yourself — if you have the knowledge of benefit and tax law to do it.

You may also find a do-it-yourself template or checklist online, although this also requires some knowledge of benefit and tax law to make sure the template actually fits your company’s benefit plan. Beware of companies requiring an annual subscription or renewal fee.

The best way to do it, of course, is to partner with a group having more than 20 years’ experience helping thousands of employers meet the Section 125 plan document requirement.

Core 125

Core Documents provides employers with everything they need to meet the Section 125 plan document requirement to establish an IRS- and DOL-compliant Section 125 cafeteria plan in PDF format for just $99. This cost reflects a one-time setup fee, not an annual charge. For an additional $50, employers can choose the Deluxe Binder option that includes the PDF email version plus a printed plan document in a 3-ring binder.

Your plan document only needs an update when there are changes in your plan or the law governing health plans that make it necessary. You let us know about changes in your plan, and we let you know about changes in the law. Otherwise, your Core 125 plan document is durable for several years.

Download now:

  Core Section 125 POP Premium Only Plan Document & Forms

 Setting up the plan

Clients love how easy it is to install the Core 125 plan document package in three easy steps.

1. Design your plan:

• Choose your plan year according to the calendar (Jan-Dec) or your tax year (Jul-Jun, for example) — a short plan year is available for the first year.
• Determine the rules and limits for your plan — our order form takes you through it step-by-step.

2. Order your plan:

• Place your order for the Core 125 plan document package.
• Your personalized plan document package arrives at your inbox, usually* the same day.

3. Start your plan:

• Print, review, and sign the plan document where indicated;
• Give a copy of the participant packet (SPD with enrollment forms) to each eligible employee; and then,
• Keep the Core 125 plan document on file with other personnel paperwork — there is no requirement to file the plan document with any agency.

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*Most documents go out via email within hours. Keep in mind that December, January, and February are our busiest months of the year and documents are processed in the order they are received. The Rush Order fee ($25) simply brings your document to the top of the stack to be processed immediately.

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