A Win-Win: The Section 125 (Cafeteria) Plan What It Is Through IRS Code Sec. 125, any company can allow its employees to pay for their contributions to the health/dental/disability/group term life insurance programs with before-tax dollars. This saves the employees at least 22% in Federal and FICA taxes. At the same time, the company will save in payroll taxes on the amounts the employee has elected to pretax. Payroll Management's Premium Only Plan (POP) - Even if you own a business with a single employee, you and your employee(s) begin to save taxes as soon as a POP is installed. With a Section 125 Plan, your employees have their group health premiums deducted on a pretax basis, which lowers their taxes and increases their take-home pay. The result is fewer taxes for your employees and lower Social Security taxes for you! Without POP With POP Taxable Income Less Taxes Net Pay Less Group Medical Other Benefits Spendable Income $1500.00 $337.00 $1163.00 $175.00 $50.00 $938.00 Gross Income Less Group Medical Other Benefits New Taxable Income Less Taxes New Spendable Income $1500.00 $175.00 $50.00 $1275.00 $287.00 $988.00 Per Pay Tax Savings $0.00 Per Pay Tax Savings $50.00 Annual Tax Savings $0.00 Annual Tax Savings $600.00   Section 125 Administrative Requirements There are several administrative details that must be followed in order to comply with Section 125 code legal requirements. Payroll Management makes the process of setting up and running a Section 125 Plan simple and cost-effective by eliminating complex paperwork hassles and dealing with governmental regulations. The Plan Document Outlines plan specifics such as a description of benefits, participation rules, election procedures, employer contributions, and the plan year. The Summary Plan Description (SPD) SPD's are distributed to all plan participants. This document summarizes employer-specific plan characteristics including information concerning the plan's sponsorship and administration. Department of Labor Documentation The SPD is a Department of Labor required document. The SPD must be provided to plan participants within 90 days of the plan's effective date. Employee Enrollment Initial enrollment needs to be administered. Participants can enroll once a year at the designated enrollment period before the beginning of the plan year. Payroll Management provides enrollment booklets that include an Introduction to Employee Tax Savings, a Questions and Answer section, and enrollment forms. Employee Benefit Plans The company offers access for small businesses to all types of employee benefits. As a result, advantages of these popular plans can be enjoyed by any size business.   home l about us l services l contact us l forms payroll l tax & reporting l benefits l workers' comp l management services Member of the American Payroll Association, Independent Payroll Processors Association, and the Better Business Bureau.