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Section 125 plan documents should include information about the plan year, available benefits, eligibility, and the process for making pre-tax elections. Working with a third-party administrator or tax advisor can help ensure compliance with plan document requirements and avoid penalties.
How much does a Section 125 plan cost? Setting up plan documents and forms for your Section 125 plan is vital. If you use an attorney or tax advisor, costs are typically between $100 and $600, depending on your third-party administrator (TPA), broker, insurance agent, or tax advisor.
Employees Must Use Or Lose FSA Funds One potential drawback of Section 125 plans is the use it or lose it provision for. Employees must use their contributed funds within the plan year or risk forfeiting any unused money.
A Section 125 plan typically lets employees use pretax money to pay for health insurance premiums for medical, dental, and vision. Other options include retirement deposits, supplemental life or disability insurance, Health Savings Accounts, and various medical or dependent care expenses.
Section 125 plans offer valuable tax benefits for both employers and employees, making them a smart choice for any organization. By allowing pre-tax contributions for health insurance premiums, FSAs, and other qualified expenses, these plans help reduce taxable income and save on taxes.
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A section 125 plan allows employers to offer employees, their spouses and dependents certain benefits on a pretax basis, thereby lowering the employees taxable income. It essentially puts more money back in the employees pocket, which can help businesses attract and retain talent.

sample section 125 plan document