Section 125 POP Plan Documents: The penalties for non-compliance


Like many employers may be well aware now, Premium Only Plan (POP) Plan or Section 125 allows for the health insurance premiums of employees to reduce by using pre-tax dollars, thus resulting in significant savings for the tax both members. A lot of small and medium enterprises across the country have already availed of this tax-saving measures as provided for in section 125 of the Internal Revenue Service Code.

The process of setting up and maintaining the plan is very simple if you choose to seek the assistance of a professional. But if you are one of those employers who are blissfully unaware of or deliberately choose to ignore Section 125 POP Plan compliance requirements, beware. You might be in for some serious consequences.

Sponsor Section 125 Premium Only Plan not only bring benefits but also documentation requirements. In this regard, many employers may be ill-advised tax professionals in them, do not know where or how to begin to stay in line, or they may have simply forgotten.

For those who fall into any of these categories, penalties for non-compliance can be rigid, depending also on the severity of the offense. The penalties are listed in IRS Code Section 125 to include the following:

1. Fines of up to $ 5,000 or imprisonment for up to 1 year for deliberate violation of ERISA provisions;

2. Fines up to $ 10,000 and / or imprisonment up to 5 years that any false information or its representation, knowing it to be false, or will not allow the facts as required by ERISA

3. A penalty of $ 110 / day for failure to disperse overview of the Plan Description or SPD for participants within 30 days of request

4. A Department of Labor (DOL) penalty of $ 100 / day a maximum of $ 1,000 if the SPD’s request and does not occur within 30 days.

Another key consequence that could result from the breach of Section 125 POP Plan requirements for membership company employer could be held liable for claims against the plan if the documents do not give participants detailed plan polices.

But that’s not all. At worst, the pre-tax rebates may be doomed from the start, resulting in IRS assessment overdue back taxes plus interest and the corresponding penalties.

As an employer, you have many tasks to juggle. The situation described above can clearly be avoided with the guidance and expert advice. Make sure to point 125 POP Plan documents are updated and consistent database.


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