What type of benefit plans can be included in a POP?
Under IRS Code Section 125, the types of benefit plans which may be offered under a POP Flexible Benefit Plan include the following:
- Health insurance
- Dental insurance
- Vision insurance
- Accidental death and dismemberment insurance
- Short-and long-term disability insurance
- Vacation Buy/Sell
What legal documents are required for plan sponsors?
- Flexible Benefit Plan Document: This document explains the plan sponsor’s responsibilities and is required under law. It should be signed and kept on file with other important benefit information.
- Summary Plan Description (SPD): All benefit-eligible employees should receive a copy of the SPD as it explains the regulations and parameters of the plan. This document will be updated by GDI each time you change your plan and as IRS regulations change.
Salary Reduction Agreement: An employee must complete a Salary Reduction Agreement in order to participate in the plan. All Agreements should remain on file with your organization. Employees do not need to complete a new Agreement each plan year; however, if your plan changes or IRS regulations change, a new Agreement will be required.
- Is a POP subject to any nondiscrimination tests?
Premium-only plans may not discriminate in favor of Key employees in regard to eligibility or in regard to contributions allowed and the benefits provided. A Plan is considered nondiscriminatory if:
- It benefits a fair cross section of employees.
- No employee is required to complete more than 3 years of service in order to participate.
- Key employees receive no more than 25% of non-taxable benefits under the plan.
Do employees have any additional tax reporting obligations as a result of participating in the POP?
No. Participants will notice that their W-2 reflects a lesser amount as ‘taxable wages’ than if they had not participated in the plan.
What are “Change in Status” events?
The IRS has defined the circumstances under which participants may change their elections mid-plan year. Requests for changes due to “Change in Status” events are subject to the terms and limitations of your underlying group benefit plans. An election change may be made only if it is consistent with, and on account of, any of the change in status events listed in the Election Change Matrix in the back of your SPD.
Is a plan sponsor required to allow an employee to change his/her election if a qualified change in status event occurs?
No. A plan sponsor may restrict participants’ opportunities to change elections as long as the events are handled consistently throughout your plan year. It is important that the plan documents reflect whatever restrictions may be in place.
Can an election change be applied retroactively?
A change may only apply retroactively if it applies to birth or adoption. All other changes must be made on a prospective basis only.