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With over 76 years of experience, The Jordan Insurance Group is an industry leader in Life Insurance strategies and Employee Benefits. We strive for excellence through our due diligence in selecting products to satisfy our clients’ needs with proven benefit designs and tax strategies. Our Team utilizes a diversified multi-level approach in preserving, protecting and growing wealth for our business and individual clients.
Most Employers Don't Know What Is Necessary For Compliance
If you've decided to invest in a premium only plan to pay for group insurance premiums using pre-tax dollars, keep in mind that you have several important responsibilities as the plan sponsor. While many vendors will assist you in the plan's administration, it's important to stay compliant if you hope to take advantage of tax breaks. Premium only plans, or POPs, offer great tax incentives to both employer and employee. While the employer can give his employees a pre-tax option for paying health premiums, which can save them 20 to 40 percent of their payroll deductions, employers save 7.65 percent of each dollar they put into the plan. This adds up over time, and explains why so many employers would want to take advantage of this type of cafeteria plan. However, many employers don't understand how to stay compliant, and so can accidentally trip up. Stay ahead of the curve by making sure you check the following off your list:
  1. Design your plan. It must start on or after the date you adopt the plan, and does not have to be a calendar year. You must also decide which benefits you'll offer, who is eligible and how contributions will be made.
  2. Enlist an insurance agent's help to create and officially adopt your plan, then check it for accuracy before putting into effect.
  3. Decide how long your open enrollment period is, then let employees know before the plan year begins. Any choices made during this period are final, so do not attempt to change them if you want to remain compliant. Review the exceptions to this rule so you don't make a mistake.
POPs offer employers the flexibility to create plans that work for them, but then bind them to their rules. Avoid the mistake of thinking you can change them just because you're the plan administrator and you'll be fine. Source: http://www.cpa125.com/Premium%20Only%20Plan.htm
William Jordan
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