2012 ★ what is the average price for ontents insurance for a 2 bedroom flat. ★ 125 plan key employee, section 125 nondiscrimination rules, section 125 key employee definition, section 125 highly compensated employee limit, section 125 cafeteria discrimination, section 125 2012 discrimination rules, irs section 125 nondiscrimination rules, HIGHLY COMPENSATED EMPLOYEE GUIDELINES FOR 2012, hce limit 2012 cafeteria plans, definition of highly comped for 2012 cafeteria plans, cafeteria plan key employee 2012, Cafeteria Plan 2012 Rules, 2012 premium only plan hce limit, 2012 Nondiscrimination testing for cafeteria plans, 2012 discrimination testing requirements for Section 125 Plans, whiplash compensation direct line. 2011 Prices tesco ipad 2 insurance, block vehicle insurance.

Section 125 Cafeteria Plans gives employers the opportunity to offer their employees a variety of health care benefits with the deductions made pre-tax. That is, the employees’ premiums for various insurance coverage are deducted from his taxable income, thereby lowering his Federal withholding, FICA tax, and Medicare taxes. In the end, the employer gets to realize tax savings for his share of the taxes, making it a win-win situation for both employee and employer.

But the IRS also has rules in place to ensure that the plan’s benefit is not subjected to abuse. The IRS has always been known to be especially watchful of employer-offered benefits including pensions and tax-sheltered annuities. The agency ensures that the average employees get the most from these plans, and that the benefits are not only enjoyed by an organization’s higher ups. And that’s where nondiscrimination rules come in. Section 125 has nondiscrimination rules all its own.

First, a cafeteria plan should not favor “highly compensated” employees. The IRS provision defines highly compensated employees as a. officers; b. shareholders who own over 5% of company stock; c. a highly compensated employee as evidenced by facts and circumstances; and, d. a spouse or the dependents of any of the individuals defined above.

Second, a cafeteria plan should not favor “key” employees. The IRS says that this is a. an officer receiving a gross annual compensation of over $160,000; b. an employee who also owns at least 5% of the company; and, c. an employee owning at least 1% of the business and who receives a gross annual income of over $150,000.

The IRS Publication 15 states that should the Section 125 Plan favor HCEs or key employees, you will have to include in (tack onto) their taxable wages the value of the taxable benefits they could have selected. The increase in taxable wages would also translate to higher payroll taxes for the employer to pay . This also means that the rule would still apply regardless of whether the favored employee will avail of the benefit or not.

Your plan “favors” these groups if more than 25% of the nontaxable benefits for all employees under the plan go to these employees. Any Section 125 plan drawn through a collective bargaining agreement however, is assumed to be in accordance with the nondiscrimination rules.

So, if you’re offering a cafeteria plan, you must make sure that 1. the plan is accessible to all employees; and 2. the same types of benefits and amounts should be available to all employees under the plan.

IRS regulations also require employers to test their plans for compliance with the nondiscrimination rules by the end of every plan year. That is, if your plan runs from January 1 to December 31, you need to be in compliance on December 31 (but really, you should comply all year round, and not just on one day).

Conclusion. A Section 125 Cafeteria Plan is a great benefit for employees, but the administrative rules can trip up unsuspecting employers. Be vigilant of your plan and see to it that you comply with IRS regulations. If you need help or just don’t have the time to do this, consider hiring a professional who can guide you through the minefield.

Give us a visit at http://taxfreepremiums.com to know you can be in compliance with your cafeteria plan. We also have a tax savings calculator that can assist you in determining just how much you will to save with a Section 125 POP Plan.

Tagged with: • • • • • • • • •

Like this post? Subscribe to my RSS feed and get loads more!