What is a Section 125 Plan and how does it work?
Section 125 of the IRS code gives employers the ability to adopt a program that allows employees to pay for certain benefits with pre-tax dollars. This allows employees to save taxes and increase take home pay. The amounts deducted for these benefits are not subject to Federal Income Taxes, Social Security and Medicare taxes, and in some cases, State Income Tax. The most common Section 125 Plan is a P.O.P. or Premium Only Plan. Under a P.O.P., the employee portion of premiums paid for employer-sponsored benefits such as health, dental, life insurance (up to $50,000) and long-term disability are deducted from the employee's paycheck before taxes.

Who is Eligible for The P.O.P.?
All employees who meet the eligibility requirements of the Plan can join the program. The tax savings that result from having a P.O.P. program are not eligible for key employees or highly compensated employees unless it is nondiscriminatory to all employees. CPI will assist the employer with the appropriate testing that is prescribed by the IRS Code.

What health/insurance plans are eligible under the Plan?
Section 125 allows employees to use pretax contributions to fund their portion of premiums for the following types of benefit plans: 1)Medical Insurance Plans, 2) Dental Insurance Plans, 3) Term Life Insurance Plans (Limit - $50,000 face value), 4) Long-Term Disability.

When can I enroll in a Section 125 Plan and can I change my salary reduction amount?
An employee can enroll in a P.O.P. at the beginning of a plan year. Once an election is made, it cannot be changed unless there is a "change in life status." The following events are examples of such events: 1) an employee gets married, divorced or becomes legally separated, 2) child birth, adoption, or death of a dependent, 3) employee, spouse or dependent becomes newly-employed or unemployed, 4) change in job status (part-time to full-time or vice-versa), 5) a dependent becomes ineligible for a health/insurance plan, 6) employee, spouse or dependent changes residence or worksite, 7) employee, spouse or dependent becomes for Medicare or Medicaid, 8)significant changes of premiums during the policy year.

When will our employees receive a Plan Description?
Once the employer has completed the initial paperwork, CPI will provide each employee with a Summary Plan Description (SPD) and enrollment forms. The packet will have instructions and forms related to the administration of the Plan. Every year during the notification period, each employee will receive a new SPD.

I have heard of 5500 testing. What is it?
The IRS mandates that each P.O.P. be tested to insure that the benefits are applied equally to employees and are not a special program for owners or other highly-compensated employees. The testing form is called a 5500 Form because it is governed by that Section of the IRS code. CPI will provide each employer with the appropriate forms to initiate the Federal Reporting. CPI will complete the appropriate Form 5500 and return it to the employer for his/her signature.