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Home My WebLink AboutDocumentation_Miscellaneous_Tab 03_02/08/1994 PREI��IIUM CONVERSION PLAN Internal Revenue Code Section 125 permits employees to pay their share of the cost of qualifierl benefits with tax -free income. This means the employee does not have to pay Federal Income Tax or Social Security Tax on their contributions. The employer saves on matching Social Security contributions and on other taxes based on payroll. This is accomplished by installing a Cafeteria Plan, also called a Flexible Benefits Plan, as defined by the IRS. The types of Cafeteria Plans allowed by Section 125 vary greafly, but the simplest and most cost effective is the Premium Conversion Plan. The implementation of a Premium Conversion Plan primarily inv4lves changing some of the administrative procedures within the existing benefit structure. The Premium Conversion Kit will guide you through the following steps: • Preparing and distributing an employee announcement letter • Processing Salary Reduction/Waiver Forms • Adjusting Payroll Deduction information in your payroll system • Preparing a plan d�ument covering the Premium Conversion plan in detail • Filing of IltS Form 5500 (filing requirements change under Section 125) You do not n�d a great deal of expensive outside help to install a Premium Conversion Plan. Our do-it-yourself kit will give you all of the information you will ne�d. The ldt contains the following materials: • A set of implementation instructions. � Sample announcement letters. • A years supply of Salary Reduction or Waiver Forms. • Sample plan document. • Filing instructions for IItS form 5500. • Telephone consulting, if desired. There are three enrollment methods. The "voluntary° plan requires that an employee complete a form in order to participate. The "mandatory" plan requires no forms. The "automatic" plan requires forms only from those who waive participation but does not force participation. The Premium Conversion Kit offers a simple way to install an up-to-date benefit plan and cost can be recovered very quickly through payroll tax reduction. Employees save on income taxes and Social Security contributions. Less taxes means more spendable income for both the employer and the employee W6y wait, ao one likes to pay taxes! C��cordia e � PREMIUM CONVERSION PLAN , APPLICATI�N Name of Employer: � Address: Street City State Zip Primary Contact: Number of Eligible Employees: Desired Effective Date: Desired Enrollment Method: (Circle One) Automatic Mandatory Voluntary Signature of Authorized Representative: � TERMS Fees are payable in advance and should accompany this application. Checks should be made payable to Acordia of South Florida, Inc. The fee structure is as follows: Initial Fee Optional Telephone Consultin�, $300.00 $100/Year The completed application and fees should be sent to Acordia of South Florida, Inc., 501 South Flagler Drive, Suite 600, West Palm Beach, FI. 33401. Attn: Susan E. Vasileff. For more iaformation, please call Susan E. Vasileff (40'� 838-9658. Once the initial fee is received, implementation materials and forms will be pmvided. Acordia Corporate offers guidance only and accepts no responsibility for the content of the plan documents or the administration of the plan. C��cordia FF� 07 '94 17=23 P.1�1 Imp��t on �oc�aY Sec�.rity B�ne�ts Par�icipation in a Fle�le Benefit ptan genesaAy has littie effect on SoctaI Security bene�ts. The following �ples are deslgaed to shaw the Impact on two hygathetical 'sn�d.ividu�s. Th�se e�tamples are greatl�t simp��t�. Scacia! Security bene�ts are based on a camptex forme�la tha� �akes u�to �ccount eamtngs aver a Iong periad of i�.e. �nd the formulas ch�nge frorn t�o to t�rnc. Thcy do not refle�t inflatiQn ar p��r mcrc�scs snd they arte Gased an the �.9$$ Sc�cial Security bene�t formuia Keep in rrt�nd that everyone's situation is different. ��csmp�e �'1 An empl ee age 59, .m�akes $35,�10 per year, and reduc+es taxabie salary by $1,000 er Jear.� etnployee �'etix'es at age b2 and b�gins tQ draw Socia! Sccuriry �n n�fits at agc 6�. So�ci�l S�+auitq Ta7ces Saved $226 Fede�ral Inco�ao Taxes Saved (].S%} � TotgE Taxes Saved $676 Social Seca�rity Without Reductit�n $$44 Social �url�ty W'rth. �cdut�n � Reducxion 3n Moatbly Bene�3t $ i F�an�ple �� An �employee age 30, makes �35,OE1(� per year, a�ud reduces ta�table salary b�r �9,000 per year. This empdoyee retire.s at age 65 aad b�gins to dra�v Social Secunry �►anc�ts i�aGd�tGly. Saaat 3ec�uity'�'�es Saved �24,072 F+�de�'11 �nco�ae T�s Saved (15%� 4 Q Total T�ce,� Saved �71,322 Social Securety Without RednctiQn �843 Sociai Seauity OVith Reduction � �t,edtux�on ia Monthly Ben�t �I00 It is obvious that the tax savings more than offsets the reduction in Soc�al Sec�uity be:ne�ts, paxticul�rly �f �► portion of the savmgs is rec�irected toward aa lncome- producing Investment, s�