Compliance – ERISA
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Section 125 Cafeteria Plan
A Cafeteria Plan (includes Premium Only Plans and Flexible Spending Accounts) is an employee benefits program designed to take advantage of Section 125 of the Internal Revenue Code. A Cafeteria Plan allows employees to pay certain qualified expenses (such as health insurance premiums) on a pre-tax basis, thereby reducing their total taxable income and increasing their spendable/take-home income. Funds set aside in Flexible Spending Accounts (FSAs) are not subject to federal, state, or Social Security taxes.
Premium Only Plan (POP)
Employers may deduct the employee’s portion of the company-sponsored insurance premium directly from said employee’s paycheck before taxes are deducted.
Flexible Spending Account (FSA)
In an FSA, employees may set aside on a pre-tax basis a pre-established amount of money per plan year. The employee can use the funds in the FSA to pay for eligible medical, dependent care, or medical transportation expenses.
Summary Plan Description Document (SPD)
The Summary Plan Description, or SPD, is a document that is provided to plan participants communicating health plan rights and obligations to participants. SPDs are required for employer-sponsored health benefit plans The SPD is a summary of the material provisions of the Plan Document, which is understandable to the average person and must inform the participant of his or her rights and obligations under the plan.
The Employee Retirement Income Security Act (ERISA) has developed guidelines that make it mandatory for all businesses with 2 or more employees to provide their employees with a Summary Plan Description (SPD).