Can I write my own Section 125 plan?

Section 125 of the Code clearly states that “a written plan” is required as part of a Cafeteria Plan that allows employees to choose to participate in a plan with qualified benefits. Without a written plan document, the plan is not compliant with Section 125 of the Code.

What is a Section 125 document?

Overview​ A cafeteria plan, also known as a section 125 plan, is a written plan that offers employees a choice between receiving their compensation in cash or as part of an employee benefit.

Is voluntary life insurance section 125?

If additional life or voluntary life coverage is offered through a Section 125 Cafeteria Plan, amounts paid on a pre-tax basis by the employee (pursuant to a salary reduction agreement) are always treated as employer – not employee – contributions.

Are cafeteria plans the same as HSA?

It’s called a cafeteria plan because employees choose the benefits they want, just as they choose the items they want from the company cafeteria. Funding a health savings account, commonly referred to as an HSA, may be an option under a cafeteria plan.

Is non discrimination testing required for HSA?

Employers contributing through a Section 125 plan are not subject to the comparability rules described above, but are subject to HSA nondiscrimination testing rules that ensure contributions do not favor highly compensated employees.

Is 401k exempt from FICA?

If you contribute to a 401(k) plan at work, you’ll reduce your income tax payments, but not your FICA payments. Your employer won’t have to pay FICA tax on its contribution, however. Understanding the basics about FICA tax on 401(k) contributions will help you make plans regarding your retirement planning.

Is employee life insurance pre-tax?

Life insurance premiums, under most circumstances, are not taxed (i.e., no sales tax is added or charged). These premiums are also not tax-deductible. If an employer pays life insurance premiums on an employee’s behalf, any payments for coverage of more than $50,000 are taxed as income.

What is the difference between HSA and Section 125?

Unlike other Section 125 plan deferral elections which only allow annual changes, the law allows for changes to the HSA deferral election as frequently as monthly. Although frequent changes to the elections create a small administrative burden on the employer, the benefit to employees is significant.