You think you may be saving tons when you keep most tasks within the organization or even do them yourself - including keeping your Section 125 Plan document in compliance. But the truth is, you may be losing more if you do the housekeeping yourself. And here's something pleasantly surprising about Section 125 compliance: professional help for it may actually be more affordable than you think.
Time is of Essence
Perhaps if you put a lot of time into reading and understanding Section 125 of the Internal Revenue Service Code and its related provisions such as IRS Publication 15-B and IRS Publication 969, it's possible to gain enough knowledge to administer your company's Cafeteria plan yourself. But really, who has the time? Even the simplest of these IRS regulations can still have some significant implications not easily grasped by the untrained mind. And wouldn't you rather put all your efforts into doing what you're good at which is running your business?
Outsourcing your IRS Section 125 compliance needs to a professional service means leaving the IRS requirements in the hands of those who understand it best. Even if you have to spend some, a team with extensive experience and knowledge of Section 125 plans and ERISA provisions would help make your business cost-effective because then you wouldn't have to worry about keeping track of updates in the IRS Code and instead concentrate on having an efficient business operation.
How To Know Your Plan is in Compliance
If you're among those employers who have in fact, established a Section 125 plan, and then promptly forgot about it, it's high time to take the plan document out from wherever it has been gathering dust. The IRS has recently issued a directive reminding companies to take compliance requirements seriously. There are many points wherein your plan may be deemed as not in compliance. One is when not all participating employees are eligible as per provisions in the document. Another is when the benefits being offered to or availed by employees are not included in the Section 125 Plan document. The bottom line is, the cafeteria plan utilized in the organization should be in accordance to what is specifically stated in the documentation. No more, no less.
Another area where a cafeteria plan may be rendered as outdated or not in compliance by the IRS is in nondiscrimination testing. The IRS essentially frowns on Section 125 plans that favor the company's top officers, highly-paid employees, and shareholder employees in terms of eligibility, contributions, and benefits. To ensure that a company is adhering to the tax code's policies on nondiscrimination, a plan document is required to undergo testing every end of the year.
What are the Consequences of Noncompliance?
It cannot be overemphasized how important compliance is for a tax-favored health plan. While the penalties vary depending on the how severe the infraction is, the worst case scenario is something that you would not wish on anyone - having the company's Section 125 Cafeteria plan rendered taxable. This could mean thousands in back taxes and penalties for you and your employees.
Remember, the more you think you may be saving, the more you stand to lose. You might as well give up making head or tails of IRS Section 125 and just let the experts handle it.
If you'd rather not pay the steep penalties for cafeteria plans that are not in compliance and outdated, you need all the help you can get. Visit us at http://taxfreepremiums.com and find out how we can assist with your Section 125 Plan at an affordable cost.
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