washington
URGENT!! Compliance changes have been made to Section 125 plans for 2014! Affects plans in Washington, Arizona, New Mexico. Click HERE to check compliance.

Compliance Documents

In order to maintain compliance with the IRS and avoid thousands of dollars in penalties, you ARE REQUIRED to maintain active compliance documents for each employee.  There are two ways to do this and receive your tax savings:

Use a document preparation service (recommended)

There are quite a few doc compliance services available.  The ones below are recommended, in order of editor rating:

TaxFreePremiums.com ★★★★¾  (4.8/5.0)

  • Compliance: 5/5
  • Price: 4.5/5
  • Availability: 5/5
  • Speed: 5/5
  • Ease of Administration: 4/5 (everything is online)
Tax Free Premiums - Section 125 Plans Choice



Review of service: THE best service for Section 125 Plans Compliance, Tax Free Premiums is the recommended service used by most industry professionals. Having a “set it and forget it” mentality, Tax Free Premiums is the only document compliance service we’ve found that offers automated Section 125 Plan compliance updates, including both mandatory and employer requested changes as required each year as required by the IRS, maintaining an ONLINE compliant document that is downloadable 24/7, and allowing the non-discrimination testing required for compliance in on a cloud based software package that serves only one purpose — Section 125 Plans compliance. Their annual fee includes a checklist and all the necessary employee communication documents needed to make a Section 125 POP turn-key. All the documents are in adobe format and can be printed on demand as needed at no additional fee.

As far as speed and price goes, Tax Free Premiums also comes out ahead of its competitors — a completely cloud-based solution, Tax Free Premiums can have a company up, running, and compliant within minutes for the (very) low price of $99/year.

Section125Plans.com therefore gives its first place award to TaxFreePremiums.com.

CoreDocuments.com ★★★¼☆  (3.2/5.0)

  • Compliance: 2/5
  • Price: 4.5/5
  • Availability: 3/5
  • Speed: 2/5
  • Ease of Administration: 2/5
Core Documents



Review of service: Core Documents has been the conventional choice for document compliance services in the document compliance industry. Operating a more traditional doc shop, Core Documents is the only competitor that is comparable to Tax Free Premiums in price ($99). Signing up for Core Documents service is a quick and painless process; after signing up, the documents are sent out to you in binders for your employees in approximately 3 weeks (although there is an additional $15 S&H). While it is up to you to perform your own non-discrimination testing (they send you the forms) and to keep the documents up-to-date for your employees, the documents they send will be compliant for that year for an additional $69. You do have an option to get everything in an electronic format for an additional $69 as well.

In comparison to TaxFreePremiums.com, that is the area that Core falls short — having more of a traditional solution, they have the drawbacks of not being able to keep documents up-to-date and always available. Furthermore, they do NOT offer automated compliance — they will prepare the docs, but it is up to you to actually do the compliance work.

Travisoft.com ★★¾☆☆  (2.8/5.0)

  • Compliance: ?
  • Price: 3/5
  • Availability: 5/5
  • Speed: 4/5
  • Ease of Administration: 2/5
Travisoft



Review of service: *We were asked to review Travisoft; this review is a work in progress.*
Travisoft seems to be more of an online repository for documents than an actual document preparation service. Basically, you get your documents from Tax Free Premiums and then store them and other supplementary docs in the highly available cloud system of Travisoft.

While this too puts the onus on you to maintain compliance of your own documents, it does allow you to store multiple tax documents for each employee in one place, ready to be produced for any compliance inquiries at a moment’s notice. Pricing is comparable to such a service; Travisoft requests an inquiry for each client so they know what kind of pricing they need to charge.

*If you know of another document preparation service that we should review, please contact us here.

Use a CPA/Attorney (For 500 employee+ firms w/ international benefits)

You can use a CPA/Attorney to file your Section 125 Plan; however, this option is generally more expensive.  The attorney will need to prepare documents for each employee and will most likely use one of the document preparation services listed above to maintain compliance.  However, this option can be good for larger corporations (500 employees or more) as there may be reason to mix different benefit packages in with the Section 125 Plan with international benefits.

File Yourself (not recommended)

You can, of course, prepare the needed documents yourself.  Given the noted compliance issues and penalties, it is probably best that this step be avoided (even if you ARE a CPA or attorney) as one mistake could mean the difference between happy employees with benefits and penalties from the IRS that cause loss of benefits and a blight on the company reputation.

Nevertheless, should you wish to pursue with self-filing, a good first step is to go to:

http://www.irs.gov/pub/irs-drop/n-05-42.pdf

And familiarize yourself with the most recent guidelines from the IRS.

PENALTIES FOR NONCOMPLIANCE

According to the IRS, the penalty for noncompliance is quite severe:

1. Fines of as much as $5,000 or imprisonment of up to 1 year for willful violation of ERISA provisions;

2. For declaring a false statement, misrepresentation of fact, or intentional nondisclosure of certain facts asked by ERISA, fines amounting up to $10,000 or imprisonment up to 5 years;

3. A penalty of $110 /day for failure to distribute a Summary of Plan Description or SPD to participants within 30 days of request;

4. A separate penalty of $100/day up to $1,000 maximum imposed by the Department of Labor (DOL) for failure to furnish an SPD within 30 days of a request.

ADDITIONAL HELP

If you would like additional help with getting your documents ready, you can contact us here and we’ll be glad to assist. Although we have no legal ability to file for you, we’re happy to answer any compliance questions that you may have. As long as we can help your employees have benefits — that’s what we care about.

© 2011 Section 125 Plans: The Official Resource