Why does my client need a Premium Conversion Cafeteria Plan document?
There are two really good reasons: First, providing a way for employees to pay for insurance benefits pre-tax will save your client a lot of money in employment taxes. Second, the plan is probably an overlooked legal requirement. Many businesses deduct medical and other insurance premiums from payroll pay on a pre-tax basis, but they are not aware that they must adopt a written plan document under Section 125 of the Internal Revenue Code. The penalty for non-compliance may include payment of penalties and interest for delinquent taxes and disallowance of deductions. How long will it take to complete the Premium Conversion Cafeteria Plan forms? It should not take you more than an hour once you have the variable data from your client.
