What is a premium conversion plan document?
What is a Premium Conversion Plan? A Premium Conversion Plan (PCP) is a type of cafeteria plan that offers employees a choice between cash (in the form of salary) and pre-tax contributions for certain benefits (e.g., medical or dental).
What is a premium conversion cafeteria plan?
Premium conversion allows employees to pay their share of employment-based health insurance premiums on a pre-tax basis. All cafeteria plans must be in writing and meet a number of nondiscrimination rules regarding highly compensated employees and company officers and owners.
What does premium conversion mean for health insurance?
What is premium conversion? Premium conversion reduces an employee’s taxable income by the amount of his or her health insurance premium. As a result, the employee pays less tax.
What falls under a cafeteria plan?
A Section 125 Cafeteria Plan is an employer-sponsored benefits plan that lets employees pay for certain qualified medical expenses – such as health insurance premiums – on a pre-tax basis. Typically, they can use the pre-tax money to pay for health insurance premiums, retirement deposits, or other benefit options.
Does a cafeteria plan need an SPD?
Your ERISA documents do not satisfy the IRS’ written document requirement for cafeteria plans. Almost every employee benefits plan is required by ERISA to have an SPD on file and it must be distributed to plan participants in a manner that confirms receipt.
What does it mean to waive pre-tax treatment of your employee premium contributions?
Pretax deductions from your paycheck reduce your taxable income, which saves you money by reducing the amount of tax you pay. Because of the money saved, this is generally helpful for most people.
Are FEHB premiums deductible?
This is called Federal Employees Health Benefits Premium Conversion (FEHB-PC). You are not able to deduct health insurance premiums as an itemized medical deduction on your income tax return.
What is the definition of a premium conversion?
Premium conversion is an arrangement that allows employees to make a pretax contribution to an employer sponsored health or welfare plan. Premium conversion is a tax benefit.
Do you need benefit extras for premium conversion plan?
With regard to an employee’s initial Premium Conversion Plan election, Section 125 is most conservatively interpreted as requiring an affirmative election. Benefit Extras has provided an enrollment form with your materials that may be completed by employees electing to participate in the Premium Conversion Plan.
What happens if I fail to follow the terms of my premium conversion plan?
Failure to follow the terms of the written plan document provisions may result in dis- qualification of the Premium Conversion Plan. Should your plan need to be amended and/or restated, please contact Benefit Extras.
Can a premium conversion plan be a cafeteria plan?
Yes, because a Premium Conversion Plan is a type of cafeteria plan, all of the rules of Code Section 125 apply, including a written plan document. Failure to follow the terms of the written plan document provisions may result in dis- qualification of the Premium Conversion Plan.