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If you’re an employer and have looked into possible benefits for employees you should know that a Premium Only Plan (POP) Plan or Section 125 allows for employees’ health insurance premiums to be deducted with the use of pre-tax dollars, and this leads to significant tax savings for the company and its employees. A lot of small and medium-sized businesses across the country have already availed of this tax-saving measure provided for in Section 125 of the Internal Revenue Service Code.

The process of setting up and maintaining a plan is very simple if you choose to seek the guidance of a professional. But there are some employers who are either actually unaware of, or just opt to forget about the compliance requirements that are attached with a Section 125 Cafeteria Plan, and if you’re one of them it’s high time to change that. You could face some severe penalties on account of your negligence, unintentional though it may be.

Sponsoring a Section 125 Premium Only Plan does not only come with benefits but also documentation requirements. In this regard, many employers may be ill-advised by their tax professionals, don’t know where or how to start with staying in compliance, or they might have simply forgotten.

For those who fall under any of these categories, the penalties for non-compliance can be stiff, depending also on the gravity of the violation. As detailed in Section 125 of the IRS Code, these penalties may include:

1. For violating ERISA provisions, fines amounting to up to $5,000, or 1 year imprisonment;

2. For declaring a false statement, misrepresentation of fact, or intentional nondisclosure of certain facts asked by ERISA, fines amounting up to $10,000 or imprisonment up to 5 years;

3. For failing to distribute to participants a copy of the Summary of Plan Description (SPD) within 30 days of a request, a fine of $110 per day;

4. A separate penalty of $100/day up to $1,000 maximum imposed by the Department of Labor (DOL) for failure to provide an SPD within 30 days of a request.

Another key consequence that could stem from non-compliance of Section 125 POP Plan requirements is that the sponsoring employer could be held liable for claims against the plan if the documents do not give participants accurate information of the plan polices.

But the worst thing could be is if the deductions withheld pre-tax are deemed unacceptable by the IRS since the plan was first started. The employer could be facing years worth of back taxes, interest, and penalties.

If you don’t want to have to pay these penalties, give us a visit at http://taxfreepremiums.com. We show you how we can assist you with your POP Section 125 compliance updates for just $99 a year.

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