FOR THE CPA
Four documents. Two payroll lines. Read them before your client signs.
We welcome your CPA or tax attorney on the first call. Bring anyone you’d like. We’d love to walk them through the math, and your CPA files the documents anyway.
WHAT YOU RECEIVE
Four documents, before anything is signed.
Every one of them reaches you before your client signs. If you are not comfortable, nothing is signed.
The Section 125 plan document
The written plan: the qualified benefits, eligibility, elections, and automatic enrollment with a written notice and an opt-out.
The carrier's policy form
The fully insured supplemental policy behind the benefits. The carrier pays the claims, not the employer.
QHB's payroll reporting instructions
How the two lines are reported through payroll each pay run: the pre-tax premium deduction and the after-tax benefit payment.
The proposal
Built from the company's own payroll, person by person, at 90% participation. Your client's number, not an average.
THE TWO PAYROLL LINES
What changes on a stub, and what does not.
QHB's illustration at a $50,000 salary, single, paid monthly. Gross pay is the same on both.
| Gross pay | $4,166 |
|---|---|
| Quantum 125 premium, before tax | |
| Federal income tax | $353 |
| Social Security | $258 |
| Medicare | $60 |
| State income tax | $135 |
| State disability | $46 |
| Total taxes | $853.53 |
| Benefit payment, Quantum 125 | |
| Net pay | $3,313 |
| Gross pay | $4,166 |
|---|---|
| Quantum 125 premium, before tax | −$1,500 |
| Federal income tax | $173 |
| Social Security | $165 |
| Medicare | $38 |
| State income tax | $50 |
| State disability | $29 |
| Total taxes | $457.00 |
| Benefit payment, Quantum 125 | +$1,200 |
| Net pay | $3,409+$96.14 |
The premium leaves pay before federal, state and payroll tax, so each of those lines falls. The monthly benefit payment returns after tax, following the month's wellness activity. Both lines show on every stub, and net pay rises by $96.14 a month in the illustration.
AUTOMATIC ENROLLMENT
Everyone eligible starts enrolled, with notice and an opt-out.
Each eligible employee receives written notice of the plan and the payroll deduction before it starts, and can elect out by contacting QHB. The plan document sets when an election takes effect.
Rev. Rul. 2002-27 addresses automatic enrollment in a cafeteria plan with notice and an election out. QHB's enrollment team handles the notices, the questions and the opt-outs; HR sends the notice on its normal channel.
QUESTIONS CPAS ASK
Asked on the first call, answered here.
- Is this a refund of payroll tax we already paid?
- No. It lowers payroll tax from the plan's start date forward. Every pay period before it is taxed in full.
- Can the owners enroll?
- Owners of a C corporation who are on payroll may be able to. Shareholders who own more than 2% of an S corporation, partners and sole proprietors generally cannot take these benefits pre-tax. Your CPA confirms.
- Our people earn well above the Social Security wage base. Does the saving shrink?
- Above the wage base the company's saving per person is smaller, because only the Medicare share of payroll tax applies. Your payroll analysis shows it person by person.
- Does lower taxable pay affect an employee's Social Security, 401(k) match or a mortgage application?
- Lower taxable pay means slightly less is reported as Social Security wages, and it can lower the pay figure on a loan application. A 401(k) match follows your plan's definition of pay, which your CPA checks. QHB explains all of it at enrollment, and every employee can opt out.
- We use a PEO.
- Then we check first. Some PEOs already sponsor a cafeteria plan for their clients, so we confirm there is no conflict before anyone spends time on it.
- How is Longtable paid?
- By the insurance carrier when a plan is placed, not by you. How anyone is paid is disclosed to you in writing before anything starts.
SCHEDULE A MEETING
Bring your client, or come alone.
We welcome your CPA or tax attorney on the first call. Bring anyone you’d like. We’d love to walk them through the math, and your CPA files the documents anyway.
Or call 248.742.0065Mon – Fri: 9:00 AM – 5:00 PM