Section 125 - Cafeteria Plan

With health care costs spiraling out of control, the need to supplement health care coverage with added benefits is quickly becoming a way of work/life for many employers and employees. Cafeteria Plans are the perfect solution for coping with the high cost of medical and dependent care. We offer an affordable Cafeteria Plan solution that both employers and employees will appreciate.

A Section 125 Cafeteria Plan allows employees to pay for their employer-sponsored health, dental, supplemental, and group term life premiums plus set up flexible spending accounts to pay for medical expenses, dependent care expenses, and personally owned health policies with before-tax rather than after-tax dollars. This reduces taxable compensation.

A Section 125 Cafeteria Plan is a benefit that both employers and employees will appreciate because this benefit increases employees' take-home pay and reduces employer payroll taxes. Both the employers and the employees profit.

• Employers benefit by paying less payroll taxes
• Employers benefit by increasing the efficiency of payroll dollars – by getting more money into employees' take-home pay without having to increase their gross pay
• Employers also benefit because a FSA is the simplest and most economical form of flexible benefits that can be offered by a Plan Sponsor
• Employees benefit by paying less tax and taking home more pay

PayCom offers the following services with Cafeteria Plan Administration:

• Provide all legal documents and administrative forms
• Phone support concerning administrative practices of a Section 125 plan
• Process and maintain Change of Status elections
• Process Benefit Election Forms required for plan administration
• Prepare reports for payroll setup for employee elections
• Process and send employer pay cycle contribution billing reports to reconcile with payroll
• Perform nondiscrimination testing and provide nondiscrimination reports to employers as needed
• Advise plan administration of any known plan compliance issues

PayCom offers the following Administration:

• Provide all legal Documents and Administrative Forms
• Discrimination Testing Information
• Phone Support concerning administrative practices of a Section 125 plan

Similar to a Premium Only Plan, a Flexible Spending Account permits pretax payment of insurance premiums and also offers two additional benefits to employees:

	Health Flexible Spending Accounts
	Employees use payroll withholding of pretax dollars to pay for out-of-pocket medical expenses.
	Dependent Care Flexible Spending Accounts
	Employees use payroll withholding of pretax dollars to pay for work-related expenses associated with the care of a live-in dependent, such as a child or elderly relative.

Flexible Spending Accounts encompass all the aspects of a POP plan with these additional value-added services:

• Case setup
• Onsite employee enrollment
• Claims processing and payment
• Payments via EFT or check
• Online participant inquiry and reporting (myRSC.com)
• Online employer inquiry and reporting (myRSC.com)

By implementing an FSA into your Cafeteria plan you can reduce your employees taxable compensation. You are also giving employees a way to pay for out-of-pocket medical expenses and work-related daycare expenses.

PayCom would welcome the opportunity to discuss how a Cafeteria Plan can benefit your organization. Please contact us if you are interested in learning more.