For the purposes of Section 125, the term “highly compensated person” refers to a person who is: the discussion above contains only the most fundamental rules for a cafeteria plan. You will find a complete understanding of the rules in the proposed regulations under code section 125. Employers must have written planning documents to include a master plan document, an adoption agreement (which can be included in the master plan document) and a summary description of the plan, which must be made available to all eligible workers within 90 days of being supported by the plan. Planning documents must be available every 10 years if the plan has not been updated, or every five years, when the plan has been updated. Most workers` pension plans are covered by the Workers` Pensions Security Act (ERISA) and must also provide a summary description of the plan (SPD). An SPD is a simple, English version of the master plan document and the adoption agreement and aims to inform workers of aspects of the flexible performance plan. The SPD must be made available to all eligible workers. Planning documents must be updated and amended at least every five years to reflect any changes to the plan or any regulatory updates. A section 125 plan is the only way an employer can offer workers a choice between taxable and non-taxable benefits, without the choice leading to making benefits taxable. A plan that offers only one choice between taxable benefits is not a section 125 plan. Cafeteria plans are generally subject to the non-discrimination requirements set out in section 125 of the internal income code. To meet the non-discrimination requirements of section 125, a plan must normally meet the following three tests: for the purposes of Section 125, a senior staff member is usually an employee who is one of the following: due to the complexity of the test plans for compliance with the non-discrimination rules covered by Section 125 , any employer considering providing health services only to certain categories of workers should be required to provide health services. seek the advice of a competent lawyer.
As a general rule, a worker can exclude up to $5,000 from benefits received under a program to help dependents per year. The limit will be reduced to $2,500 for married employees who submit separate returns. The exclusion cannot be greater than the working income of the worker`s employee or spouse. All dependent benefits that the employer paid to the employee or that were paid on behalf of the worker (including amounts from a plan covered in Section 125) must be listed in box 10 of Form W-2. Any amount over $5,000 should be included in Fields 1, 3 and 5 in the form of “wages,” “social security wages” and “Medicare salaries.” For more information, please see 535 PDF and 15-A PDF.