POP Plans

[Guest pensiondoc]

I'm a TPA and have not gotten involved with 125s yet. I have a life insurance agent who came to me recently with a proposal to prepare docs, SPDs and 5500s for premium only plans. I thought there was testing involved with these plans, but the fellow says no; and he says he "checked it out with an insurance company".

If there are tests involved, what are they and where can I get more info on how to do them ?

Thanks, Steve

[KIP KRAUS]

STEVE:

SECTION 125 (f) SAYS THAT A PLAN MAY NOT PROVIDE "KEY EMPLOYEES" ( AS DEFINED IN SECTION 416(i) (1) OF THE IRS CODE ) WITH BENEFITS UNDER A SECTION 125 PLAN IN EXCESS OF 25% OF THE AGGREGATE OF BENFITS PROVIDED TO ALL EMPLOYEES UNDER THE PLAN.

THIS WOULD BE THE ONLY TESTING THAT I KNOW ABOUT. ASK YOUR INSURANCE REP. ABOUT THIS.

[This message has been edited by KIP KRAUS (edited 09-28-98).]

[Lisa Hand]

Additionally, 125 Plans are required to be non-discriminatory and must pass that test. They must have a written document which is adopted by the company and are required to file the annual Form 5500. You might consider working with a TPA who specializes in these plans to insure compliance.(BenefitsLink yellow pages is a good place to look) Many insurance agents and companies think POP plans are "no-brainers" and an easy way to sell their products, however; the IRS will fine you just as fast for non-complaince with a POP as with a full Flexible benefits plan. Often the sponsoring employer (who is responsible for compliance)finds this out the hard way.