BASE^® Blog

With the increase in health insurance premiums, health care costs, dental and vision expenses, and dependent care, many employees are looking to their employers to provide the opportunity to offset these costs.  One of the easiest, and most underused employee benefits that an employer can offer their employees is the Section 125 Cafeteria Plans. 

The 125 Cafeteria Plans allow for employees to withhold a portion of their salary on a pre-tax basis to pay for their qualified expenses.  The 4 options are the Premium Only Plan (POP), Flexible Spending Account (FSA), Limited Purpose FSA (LPFSA), and Dependent Care Assistance Plan (DCAP). 

The options available through the BASE® 125 Cafeteria Plans allow employers to customize benefits and save money.  It allows employees to pay for their portion of their health care premiums, their out-of-pocket health care, dental, and vision expenses, and employment-related dependent care costs. 

The 125 Cafeteria Plan options provide access to quality benefits, while providing a variety of affordable choices that stand alone or compliment any health insurance plan in place.  Employers can offer their employees one, or all of the above options.

Premium Only Plan (POP).

Both employers and employees benefit from this IRS-approved change in an employer’s payroll process to deduct the employee portion of the employer-sponsored benefit premiums on a pre-tax basis, rather than paying with post-tax dollars. 

Flexible Spending Account (FSA).

There isn’t a year that goes by that an individual, or someone in their family, doesn’t have out-of-pocket health care expenses.  Why not use the funds that were put aside on a tax-free basis to pay for copays, prescriptions drugs, OTC medication, and more. 

Limited Purpose Flexible Spending Account (LPFSA).

Health Savings Accounts (HSAs) have been growing in popularity for more than just paying for out-of-pocket health care expenses.  Why not pair the HSA with an LPFSA and put aside funds on a pre-tax basis to pay for dental and vision expenses while saving more in the HSA for bigger health care expenses or for the future. 

Dependent Care Assistance Plan (DCAP).

Dependent care can take up to 20% of a family’s annual income, making it one of the biggest expenses a family can face.  Why not use the funds that were put aside on a tax-free basis while an employee works to pay for employment-related dependent care expenses. 

Not only do the various 125 Cafeteria Plan options save the employer valuable tax money each year and increase an employee’s take-home pay, it also is a great tool to help attract and retain employees, and help employees save 25-40% in taxes on every dollar they elect. 

For more information on the BASE® Section 125 Cafeteria Plan, contact BASE® at 888.386.9680 or visit www.BASEonline.com. 

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Being able to offer employees a custom health benefits package is a great way to attract and retain employees, but if the health benefits are found favoring one group of employees over the other, the health benefits will be found not in compliance with the IRS and will open the business up to severe IRS penalties and employees left to pay taxes on the pre-tax dollars they elected.  To continue to provide the custom health benefits package, a test must be completed each year to determine if a plan complies.  One way to ensure compliance is with Non-Discrimination Testing and BASE® can help! 

Non-Discrimination Testing (NDT) is a set of tests that is required by the IRS to determine if a company’s benefits are fair for all eligible employees. 

The BASE® NDT is for businesses who offer health and welfare benefits to their employees who want technical assistance to comply with all the regulations to maintain their tax-favored status.    

Why does Non-Discrimination Testing matter?

NDT matters because even though it is confusing and challenging, it is NOT a choice.  The IRS requires any business who offers health and welfare benefits to assess compliance on their Premium Only Plans (POP), Section 125 Cafeteria Plans, and Self-Funded Arrangements. 

NDT prevents health benefit plans from discriminating in favor of employees who are considered highly compensated employees or key employees to the business. 

Non-Discrimination Testing may seem like an unnecessary test, but failing to comply puts employers and their employees at risk of having to pay taxes on the benefits provided and IRS penalties. 

NDT should be completed once a year, ensuring that employee benefits continue to be in compliance and that employees can continue to receive the tax-free benefits. 

For more information on the BASE® Non-Discrimination Testing (NDT), contact BASE® at 888.386.9680 or visit www.BASEonline.com. 

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