April 20, 2011
The Massachusetts Health Connector and How It Can Help Your Employees
Aiming to provide affordable health insurance to its residents, leaders of the state of Massachusetts took the first proactive step towards health care. And this is how the Massachusetts Health Connector started.
How Can I Participate? In Massachusetts, if you have 11 or more eligible employees working for your small business, you must establish a Section 125 plan and offer availability to the Connector on a pre-tax basis. But just because this move is designed to give your employees better health benefits, it doesn’t mean that your company would have to spend more.
The most simple of these cafeteria plans, as Section 125 plans are also referred to, is the Section 125 POP. POP is an acronym for Premium Only Plan, and what this plan basically offers your employees is the advantage of paying insurance premiums on a pre-tax basis. And, even better, you get a benefit from their tax savings.
Why Is This Good for Employees? A Section 125 POP plan, once established by your business, allows your employees to choose the benefits that they want. This is good news for employees because they need only spend for the health plan that best fits their needs. The employee chooses from a menu of options, and the premiums he pays are deducted from their pay on a pre-tax basis. That means that the premium payment reduces taxable income. So, the employee has lower FICA and Medicare payroll taxes, as well as Federal and State Income Tax.
Among the health plans that the employee can select from through the Health Connector are Blue Cross Blue Shield of Massachusetts, CeltiCare, Fallon Community Health Plan, Harvard Pilgrim Health Care, Health New England, Neighborhood Health Plan, and Tufts Health Plan.
What’s In It for Me? If you’re the employer, you get something out of this deal too because you’ll also enjoy lower tax costs as your matching share of FICA and Medicare taxes are reduced. The lower taxable income also translates to smaller FUTA taxes, and possibly to lower state and local taxes.
While the primary intention is to provide employees with affordable health benefits, the employer ends up enjoying some savings too. Before the creation of the Connector, employees could not avail of benefits through a POP Plan Section 125 unless the employer started a health plan.
But Are There Compliance Requirements? All these talk about tax savings is music to the ears, but you could ask – How about compliance? While it’s true that IRS Section 125 POP plans are governed by IRS rules, and there are significant steps you must follow to make sure your plan is compliant and retains its tax-preferred status, keeping abreast with the latest developments in the IRS rules is doable. The government website does offer a sample do-it-yourself template that you could re-create. Another alternative is for you to consult with a professional plan administration service.
If you want to find out just how easy it is to keep in compliance with IRS policies for Section 125 POP, give us a visit at http://taxfreepremiums.com. You’ll also learn what other Section 125 benefits there could be and how you can take advantage of these.
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