Frequently Asked Questions (FAQs)
At Peigo, our goal is to provide you with the most comprehensive
payroll and workers’ compensation solution that is available today. Peigo® is the
only full service payroll provider that combines years of payroll processing experience
with the expertise and support of your personal insurance agent. This combination
ensures that you get all of the features you want and need from a payroll provider
without giving up the personal support and relationship with your existing insurance
agent, the one that you depend on for all of your insurance needs.
We hope that after you review our FAQs you will have a better understanding of our
products and services. If you would like more information, please
contact us. Click on a topic or question for more information.
How will outsourcing payroll benefit me?
How frequently can we run payroll?
Do you print the checks for me? Or do I print them at my office?
If I want to purchase check to print myself, where can I get them?
Can I import data into my QuickBooks accounting software? Or What accounting software canI export the payroll data to?
What kinds of reports will I be able to get?
Can Peigo® track vacation and sick time for my employees?
Can you help me with 1099 contractors?
Does Peigo® handle the W2’s?
Does Peigo® handle tax deposits and 940 and 941 reporting?
Will Peigo® file 941 and other reports for prior quarters?
What do I do in the event of garnishments?
What help do you provide for state taxes?
How much does the service cost?
How will I be billed?
Getting Started with Peigo® Payroll
Can I switch payroll companies in the middle of the year?
How long does it take to set up?
How do I get started?
How secure is the Peigo® service?
What about Customer Service? Will I be able to talk to the same person each time I call
Peigo?
What Is workers’ Compensation Insurance?
How Does an Insurance Company Operate?
Employee Retirement Income Security Act (ERISA) Guide
What is Pay as You Go workers’ Compensation?
Non Subscription FAQ’s
Does Non-subscription Provide an Immediate Cost Savings and Results?
Do Non-subscribing Employers Reduce Medical Costs in Texas?
Do Non-subscribers Reduce or Eliminate Fraudulent and Questionable Claims?
I am a non-subscriber in Texas, can I get “pay as you go” for my non-sub policy?
Voluntary Benefit Plan FAQ’s
What are Voluntary Benefits Plans?
What is Section 125?
Payroll Services for Your Business.
Peigo® is passionate about providing business owners with the a comprehensive, simple
to use and cost-effective, payroll processing service that is delivered in a way
that will provide a sense of security, trust, and personalized service that is unmatched
anywhere in the industry today.Manage your payroll from anywhere, anytime. Yes, it’s that easy.
How will outsourcing payroll benefit me?
Many companies are choose to outsource payroll processing in order to get out from
under the time-consuming demands associated with payroll, taxes and reporting. Hiring
an individual who is dedicated to this function can be costly. Outsourcing provides
a knowledgeable, low-cost alternative which also allows you to focus on building
your business.It’s simple. You gather your employees’ hours, wage increases, new employees,
and other relevant data and transmit them to Peigo® via the web interface, email,
fax or telephone each pay period. Peigo® will utilize this data to pay employees,
withhold taxes, and report information to the appropriate federal and state agencies.How frequently can we run payroll?
Payroll processing can be set up on a weekly, bi-weekly, bi-monthly or monthly cycle.
If checks are needed in between pay-cycles, Peigo® can accommodate that as well.
We can also handle after-the-fact payroll entries.Do you print the checks for me? Or do I print them at my office?
You choose what works best for you and your business. Peigo® can print checks for
you or they can be printed at your office. Your employees will also have the option
to have choose direct deposit at no additional charge.If I want to purchase check to print myself, where can I get them?
Peigo® provides access to low cost check supplies.
Can I import data into my QuickBooks accounting software? Or What
accounting software can I export the payroll data to?Peigo® payroll files can be exported into various types of accounting software, including
QuickBooks.What kinds of reports will I be able to get?
With each payroll run, Peigo® will provide a print detail report which is similar
to a check register. Also included is a print summary showing all totals for the
current pay date. Monthly and quarterly files are also provided, as well as a monthly
new employees report. We will also provide a printed time sheet you may use to record
hours and return to us by fax if you are not using the web interface. At your request,
Peigo® can also provide other reports such as: general ledger, tip allocation, detailed
earnings, vacation and sick accrual, workers’ compensation premium, tax payments
and employee status.You will have access to many of these reports on-line for you to access at any time,
from any place.Can Peigo® track vacation and sick time for my employees?
Yes. Peigo® will track vacation, sick and other flexible time for your employees.
You can choose to have this information available on the employee’s check stubs.
We can also provide a report showing this information.Can you help me with 1099 contractors?
Yes, Peigo® can support contractor payments, including providing year-end reporting
and 1099 filings.Peigo® will print and mail W-2s and send them to the employer electronically, if
desired. This process includes providing copies to the appropriate government agencies.Does Peigo® handle tax deposits and 940 and 941 reporting?
Peigo® will take care of all federal reporting for you. Additionally, Peigo® will
handle your state payroll reporting.Will Peigo® file 941 and other reports for prior quarters?
Peigo® will only process payroll tax filings for the periods in which our services
were used. Since we file and pay taxes on a current basis, there will never be a
need for us to file or pay taxes for a previous quarter or year.What do I do in the event of garnishments?
Peigo® will withhold and provide payments to meet garnishment obligations. Just send
documentation to Peigo® to get this set up.What help do you provide for state taxes?
Peigo® will handle all reporting for State Payroll Taxes. We will also take care
of applicable local payroll taxes.How much does the service cost?
Payroll costs vary, depending on several factors, including number of employees,
frequency of pay and level of service. If you are interested in receiving a quote,
please click here to complete an online quote request form.Peigo’s fees for payroll processing services will be withdrawn from your bank
account one day prior to each payroll check date.Can I switch payroll companies in the middle of the year?
Yes, you can. And we make it a simple and pain free process. Just provide us with
year to date reports showing each employee’s pay history and withholding totals
and we’ll take it from there.How long does it take to set up?
From the time you provide us your information and year to date reports, we will
require ten business days to set up a new employer for payroll processing.Just provide us with a few pieces of information and we can get the ball rolling.
You can click here to complete an online quote request form.How secure is the Peigo® service?
Peigo® employs logins and passwords as a first line of security. We also use advanced
encryption technology, specifically, 128-bit secure socket layer technology currently
used by major financial institutions. Peigo® implements multiple firewalls and heavy
physical security over servers, including intrusion detection devices.What about Customer Service? Will I be able to talk to the same
person each time I call Peigo?It is our mission to make payroll a positive experience for you. Peigo® will assign
a dedication technician to handle all of your needs. We pride ourselves on our excellent
customer service. Should you have any needs, contact your technician via email or
phone for assistance. You will be greeted with a smile and a helping hand.
General Insurance FAQ’s
Have you ever wondered what exactly insurance is and why we buy it? Well, insurance
is a way of transferring risk from you or your company to an insurance company.
Essentially, this means that instead of you keeping (retaining) the risk of loss,
you pay an insurance company a set amount of money (premium) to adept the risk and
pay the loss or loss(es).Insurance is divided into two categories: commercial (business) coverage’s and personal
(Individual/family) coverage’s. An example of personal coverage is a homeowner’s
insurance policy. To illustrate now insurance works, let’s say you pay $1,000 each
year for a policy that will rebuild your home, valued at $200,000, in the event
it is destroyed by fire, hurricane, tornado, or some other covered peril. You could
choose not to insure your home and take the risk that you can afford to rebuild/repair
it in the event it is damaged.By purchasing insurance you transfer this risk of loss to the insurance company.
In the event the house was destroyed, the insurance company would pay to rebuild
the house instead of you. In this example, if the premiums stayed constant, it would
take 200 years of saving the annual premium in order to save enough money to cover
the loss. This is why most people prefer to transfer the risk to the insurance company.
They believe a catastrophic event will occur within the next 200 years, and they
would prefer that the insurance company pay for the loss.However, insurance should not be viewed as a financial investment tool. Unlike stocks,
bonds, certificates of deposits, and other financial instruments, investing $1,000
each year in an insurance policy will not pay back $1,000, or more, each year. Remember,
this is a risk transfer tool, not an investment opportunity. So, paying $1,000 in
annual premiums does not entitle you to receive $1,000 or more each year in claims.Source: Service Lloyds
What Is Workers’ Compensation Insurance ?
Workers’ compensation insurance is a special type of commercial insurance designed
to provide medical care and reimbursement for lost wages for employees who are injured
in the “course and scope” of employment. Keep in mind that workers’ compensation
insurance is a no fault type of insurance. This means the policy provides benefits
even if employees don’t follow your safety rules. As long as the injury occurred
in the “course and scope” of employment, the coverage applies. Course and scope
of employment essentially means the employee was performing some job function that
the company asked them to do. This may be their regular job duties or a special
one-time task the company requested.Workers’ compensation insurance is not a welfare or unemployment program. It is
not designed to replace a workers’ income because they don’t want to work anymore.
Rather, it is designed to provide medical treatment to make the worker “whole” again
and temporarily replace their wages until they can return to work. This may seem
obvious, but it is an important concept. The worker must be injured on the job in
order to receive benefits. And the benefits should be considered a temporary replacement
of wages, not a permanent one.Source: Service Lloyds
How Does an Insurance Company Operate?
Insurance companies are like all other businesses in that their primary objective
is to make a profit. Any business makes a profit when revenues exceed expenditures.
In the case of an insurance company, this means when premiums are greater than the
combined cost of paying claims and the cost of doing business, the company makes
a profit.Let’s look at the earlier example of a $1,000 premium for $200,000 of property coverage
in a homeowner’s policy. It may seem impossible for the insurance company to make
money. If there is a total loss of the home within a 200-year span. The insurance
company loses money. That is why insurance companies write a lot of different homes
in different areas.The operation of an insurance company is based on two basic concepts:
* the concept of independent losses, and
* the concept of spreading risk
Under the concept of independent losses, an insurance company looks for one loss
that is not likely to affect a large number of different policyholders. An example
of this is robbery/burglary. One policyholder may suffer a large burglary loss,
but this affects only the one policyholder. So the cost of this one loss spread
among a large group of policyholders. Under the concept of spreading risk, the insurance
company tries to “spread” the risk among a large number of policyholders so that
one type of loss won’t affect the entire group of policyholders. This is why an
insurance company does not write all of their homeowner’s coverages in a coastal
area. Otherwise, one hurricane could destroy all of their policyholder’s homes,
resulting in huge payouts for the insurance company. Again, the losses experienced
by a few policyholders will be paid for by the majority of policyholders who do
not experience any losses. These two concepts are closely related. By successfully
achieving both of these on a large scale, premiums can be kept low, and the insurance
company can make a profit.It is important to understand how insurance companies operate so that you can better
understand the reasons behind why they do what they do. An insurance policy is a
type of contact. And in this contract both parties are expected to act in “good
faith.” This means that the policyholders should not file false or fraudulent claims
and the insurance company should pay claims promptly and accurately. In order for
any insurance company, or the entire insurance industry, to be profitable, all parties
must act in good faith. Insurance is, above all, a contract of good faith.Source: Service Lloyds
Employee Retirement Income Security Act (ERISA) Guide
What is ERISA?
The Employee Retirement Income Security Act of 1974 (ERISA) is a Federal Act that
provides significant protection for participants and their beneficiaries in Employee
Welfare Benefit Plans.What is an Employee Welfare Benefit Plan for purposes of ERISA?
An ERISA Employee Welfare Benefit Plan means any plan, fund, or program of benefits
established or maintained by an employer that provides for its participants or their
beneficiaries, through insurance, or otherwise, medical, surgical. or hospital care
or benefits in the event of sickness, accident, disability, death or unemployment,
other than pensions on retirement or death.Who administers and enforces the provisions of ERISA?
The U.S. Department of Labor, through the Employee Benefits Security Administration
(“EBSA”), is responsible for enforcing the fiduciary, reporting and disclosure provisions
of Title I of ERISA. The goal of Title I of ERISA is to protect the interests of
participants and their beneficiaries.How does ERISA regulate the design of an Employee Welfare Benefit Plan?
ERISA provides that every employee welfare benefit plan shall be established and
maintained pursuant to a written instrument. This instrument, or Master Plan Document,
shall provide for a named fiduciary or Plan Administrator. The Plan must inform
participants and their beneficiaries of the basis for paying benefits and the procedure
for handling claims, denials and appeals of denials. ERISA does not regulate the
actualbenefits to be provided.
What is a Plan Administrator?
The Plan Administrator of Plan Sponsor is the person, committee, or organization
designated by the Master Plan Document to administer the plan and will generally
be the Employer. ERISA requires the Plan Administrator to discharge its duties according
to the prudent man rule and solely in the interest of the participants and beneficiaries
of the Plan.What are the reporting and disclosure requirements?
ERISA fully exempts employee welfare benefit plans from participation, vesting and
funding provisions (Title I) and plan termination insurance provisions (Title IV).
Plans with fewer than 100 participants at the start of the plan year are exempted
from most of the reporting and disclosure provisions of ERISA if they meet the following
conditions: 1) Plan benefits are paid as needed from the general assets of the employer;
or 2) benefits are provided exclusively through insurance contracts or policies
issued by an insurance company; or 3) both. The only reporting requirement is that
the administrator must provide each covered participant and each beneficiary with
a Summary Plan Description (SPD).What is A Summary Plan Description (SPD)?
The SPD is a written summary of the benefits provided under the Master Plan Document,
plus a statement of the participant’s rights under ERISA. It must be written in
a manner calculated to be understood by the average plan participant. Descriptions
of exceptions, limitations, and other restrictions of plan benefits cannot be minimized.
If 25% of the plan participants are literate only in the same non-English language,
special assistance must be provided.When is the SPD to be distributed to participants?
Generally, no later than 120 days after the plan is established; thereafter, 90
days after an individual becomes a participant.What about SPD updates and notice of plan changes?
Participants must be given an update summarizing material modifications no later
than 210 days after the close of the plan year in which the modification or changes
were adopted, regardless of when they become effective. A fully revised SPD incorporating
such changes must be issued no later than 210 days after the end of the fifth plan
year from the distribution of the prior SPD. If no changes have been made since
the prior SPD was distributed, the Plan Administrator may wait and re-issue the
SPD after ten years.What Civil penalties apply?
ERISA imposes a $100 per day penalty on a Plan Administrator who fails, within 30
days, to comply with a participant’s request to obtain a copy of the SPD. In addition,
ERISA reporting and disclosure requirements have serious penalties for non-compliance.
Failure to timely file any required annual reports with the Internal Revenue Service
can result in a penalty of $200 a day and willful violations may result in criminal
penalties. Small employers (those having fewer than 100 participants) are exempt
from this annualreporting requirement.
What about civil lawsuits for plan benefits?
If a benefit claim is denied by the plan administrator, the administrator must provide
a timely written explanation to the claimant, giving reasons for the denial of benefits.
This explanation must be made in terms that are comprehensible to that type of worker,
and the claimant must have at least 60 days to request a full and fair review of
the decision. If the plan provides for appeal of denial of benefits to be made (again)
to the plan administrator, that is the process which must be followed. Only after
the claimant has exhausted this “administrative procedure” can he bring a civil
lawsuit to enforce his claim. In almost all cases, the plan administrator should
be able to remove any litigation to Federal court.A denial of benefits by a plan administrator, under an ERISA governed plan, will
only be over-turned by a court if the denial was “arbitrary or capricious.” Under
this standard, the Federal District Court considers only the evidence available
to the plan administrator at the time the denial of benefits was made. A jury trial
is not available, and the recovery is generally limited to the benefits offered
under the Plan. Attorney fees MAY or MAY NOT be awarded by the court. State courts
have concurrent jurisdiction but the ERISApreemption may still be raised.
What law governs filing a claim for benefits under an Employee Welfare Benefit Plan?
Generally, ERISA preempts or supersedes any and all state laws insofar as they relate
to an employee welfare benefit plan. Therefore, all state mandated insurance coverage,
claims practices, claims administration and other services relating to an employee
welfare benefit plan are exempt from state laws and regulations and are governed
by ERISA. This includes claims under the Texas Deceptive Trade Practices Act.Does ERISA preempt the common law claim of negligence, in the event a Texas non-subscriber
gets sued for Negligence by an employee who is hurt on the job?NO!
Does ERISA preempt Texas House Bill 2055, as amended by House Bill 369 – The Small
Employee Health Insurance Availability Act?Probably. ERISA will preempt any state law other than any portion which “regulates”
the business of insurance. The Texas Department of Insurance is aware of this possible
conflict but has declined to seek an Attorney General’s opinion.© Copyright 1996 Wayne D Lawler, Jr.
Source: Distributed by Texas NonSubscriber with permission from Wayne D Lawler,
Jr.Pay as You Go Workers’ Compensation
If you carry workers’ compensation coverage, you probably
know about large deposits, large installments, and the dreaded audit at the end
of the year. This payment structure can be a significant cash flow headache, especially
for growing or seasonal operations that can’t precisely predict what they payrolls
will be a year in advance. The good news? We have a solution that can help!What is pay as you go workers’ compensation?
A growing number of insurance companies and payroll services are teaming up to offer
automatic direct payment of workers’ compensation insurance premiums as part of
regular payroll processing. The treatment of premiums is similar to the way taxes
are handled, calculating them based on the actual payroll using a complex process
that considers job classifications and other factors, and then remitting them with
each payroll run. The result is that you typically won’t have any audit surprises
or large lump sum payments either up-front or at the end of the policy period.Insurance companies typically require that participating payroll services be bonded
and insured, so clients are assured the money collected is remitted to the carrier.
The insurance company works with the payroll service and client to make sure employees
are properly classified so that the premium calculation will be accurate. And because
the premium is paid with every payroll cycle, discrepancies can be spotted and corrected
quickly, before they become substantial.How do I participate?
To participate, you must use a payroll service that has an agreement with your worker’s
compensation carrier. Insurers require that your payroll be processed by an independent
outside company, not internally, to qualify for this type of payment agreement.
For some employers, getting access to a pay as you go workers’ compensation solution
is one of the things that makes a payroll service worth purchasing.What kinds of carriers are offering this kind of policy?
Many of the large carriers that you are familiar with are offering this payment
option today, however, you must use a payroll service that has an agreement with
those carriers. Many payroll companies will provide access to only one carrier with
a very “vanilla” appetite for risk. In other words, if you do not fit their narrow
list of businesses classifications that the carrier is interested in, you will not
be able to get a pay as you go solution. At Peigo, we provide access to many carriers
that offer a pay as you go workers’ compensation programs. What does that mean for
you? It means that we will find you the RIGHT policy for your business. It also
means that we are much more likely to find a carrier that wants your business.Can I get this service without using a payroll company?
In most cases the answer is simply “no.” The vast majority of carriers are requiring
that employers use an external payroll processing company to qualify for this type
of payment arrangement.I am a non-subscriber in Texas, can I get “pay as you go” for my non-sub
policy?Yes, you can! But only with Peigo! Peigo® is the ONLY payroll provider in the country
that can provide pay as you go for non-subscribers. We offer access to several non-subscription
carriers that allow us to provide a pay as you go solution for non-subscribers.
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Non Subscription (Texas employers only):
In 1989, Texas employers faced a crisis. The expense of subscribing to the state’s workers’ compensation system threatened to drive companies out of business. Excessive litigation and fraudulent misuse of the system generated overwhelming increases in premiums. Inadequate premium rates for benefits and the resulting expenses caused many insurers to leave the workers’ compensation line of business. The state’s Assigned Risk Pool became
the largest insurer, and the losses incurred discouraged potential new insurers from stepping in. Fortunately for businesses in Texas, legislators who drafted the first Texas Workers’ Comp laws in 1913 were farsighted
enough to provide an option. Texas offers all employers (other than local units of governments, such as cities, counties and school districts), the opportunity to “Nonsubscribe”, or “Opt Out” of the state’s workers’ compensation program. The ranks of Nonsubscribers began to grow.What is Non-Subscription?
Does Nonsubscription Provide an Immediate Cost Savings and Results?
One of the major disadvantages plaguing the workers’
compensation system is that employer workplace safety programs are slow in showing
results. In fact, the methodology used to determine workers’ comp premiums postpones
financial rewards for reducing employee injuries three, four or more years after
the advent of a successful safety effort. A nonsubscriber, on the other hand, can
realize immediate cost savings for instituting a workplace safety program without
having to wait for the experience rating to catch up as in workers’ compensation. This enables the nonsubscribing employer to quickly respond with appropriate actions if costs related to workplace injuries
suddenly rise. Also nonsubscribers can “text” the effectiveness of workplace safety programs by measuring results immediately unlike workers’ compensation where the employer may find out two or three years down the
road that the safety program had no impact on premiums.Do Nonsubscribing Employers Reduce Medical Costs in Texas?
Recently, a great deal of media attention has been focused on managed care of employee
injuries as a means to reduce cost. Unfortunately, there is little a subscriber
to workers’ compensation in Texas can do to manage care in the restrictive parameters
of the workers’ compensation system. Even withchanges in the Texas workers’ compensation
law, the employee still can select his/her own medical provider. Therefore, it is
virtually impossible for a subscribing employer to establish relationships with
health providers who would provide quality care at a reasonable cost. On the other
hand, a nonsubscriber may meet with, survey and establish a network of quality providers
whose only goal is to provide the best care possible, not just to make money by
abusing the employee and employer as some providers do who focus on treating only
“workers’ comp.” injuries.Nonsubscribers are able to negotiate costs for employee care. A subscriber to workers’
compensation often pays increased premiums due to over utilization and exaggeration
pertaining to the extent of employee injuries. A nonsubscriber is free to negotiate
any rate the employer and provider deem reasonable. A subscribing employer, on the
other hand, is limited to the scope of the medical fee guidelines and the antiquated
impairment rating system that was never designed to compensate an employee for a
work related injury.Do Nonsubscribers Reduce or Eliminate Fraudulent and Questionable
Claims?Contrary to some reports, fraud is still rampant in the workers’ compensation
system. Former subscribers might remember this scenario: An employee reports a lower
back injury on Monday. Investigation shows that while off of work collecting indemnity
benefits, the employee was seen working at another job lifting heavy boxes. The
employee even told another employee the injury was faked. Yet, when the workers’
compensation carrier is notified of these findings, the carrier does nothing for
fear of a bad faith claim against itself. The employee ends up having surgery on
a back that was never injured, collects indemnity and disability benefits while
the carrier does nothing at all. As a function of a properly drafted employee benefit
plan, a responsible nonsubscriber can take action on disputed or questionable claims.
As part of the plan, nonsubscribers may also implement arbitration or mediation
agreements where independent experts make decisions unlike in workers’ compensation
where a state agency generally has the final say as to legitimacy or compensability.I am a non-subscriber in Texas, can I get “pay as you go” for my
non-sub policy?Yes, you can! But only with Peigo! Peigo® is the ONLY payroll provider in the country
that can provide pay as you go for non-subscribers. We offer access to several non-subscription
carriers that allow us to provide a pay as you go solution for non-subscribers.
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Voluntary Benefit Plans FAQ’s
Today’s record-high costs for benefits are making it more expensive than ever for employers to provide quality benefits for their employees. In fact, many companies are struggling to meet the financial and security needs of their employees without undermining the company’s own financial stability. Peigo® helps organizations implement an innovative and cost-effective benefits management tool: Section 125 of the Internal Revenue
Code. With Section 125, employers have the power to establish tax-advantageous programs that can significantly enrich their current benefits plans. As a result, controlling and maintaining benefits costs can be substantially
improved, today and into the future.Section 125 of the Internal Revenue Code, enacted by Congress in 1978, allows companies
to give their employees the opportunity to pay for benefits on a pretax basis. Pretax
benefits lower payroll-related taxes for both the employer and employees.Section 125 offers several alternatives: three of the most common are Premium Only Plans, Flexible Spending
Accounts and Cafeteria Plans.Premium Only Plans: This alternative is the most basic use of Section 125. Employees
can pay for benefits on a pretax basis, thus lowering their taxable income and tax
liability. Flexible Spending Accounts:Spending Accounts are a means for employees to pay for certain
out-of-pocket health care or dependent care costs on a pretax basis.
Cafeteria Plans:
This alternative gives employers the opportunity to gain control over their benefit
expenditures through a “cafeteria” or menu-like plan.
A Cafeteria Plan is the most complex alternative because it changes the way employees receive benefits. Instead of providing a determined set of benefits (such as a medical plan and $50,000 of life insurance), each employee is given an amount of “benefit dollars” roughly equal to the employer’s expenditure for that person’s benefits. The employee then chooses from a menu of benefits and determines those that best fit his or her needs. Of course, the employer determines the available options. Although a Cafeteria Plan is more expensive
to implement, employers ultimately save money through the more efficient plan design,
as well as the tax-effective and cost effective vehicles of delivery.What are Spending Accounts?
A Health Care Spending Account (HCSA) is used to pay for almost any genuine medical expense not
covered by a group plan (either medical, dental or vision).A Dependent Care Spending Account (DCSA) is used to pay for those costs of dependent
day care that enable the employee to work. This care may be for a child under the
age of 13 or a spouse or other adult dependent who is incapable of self care. (See
IRS FAQ Child and Dependent Care Credit & Flexible Benefit Plans )For either of these Spending Accounts, the employee contributes a predetermined
amount through regular pretax salary reductions. For DCSA, the employee is reimbursed
for all expenses up to the amount he or she has deposited. In the case of HCSA,
an employee is reimbursed up to their annual election for the plan year.Planning is the key: unused employee contributions are forfeited and revert to the
employer to offset administrative costs or are given back to participants on a per-capita
basis.What are the Advantages of Section 125?
Universal appeal.
Section 125 is for every company that wants to:√Share the cost of benefits through employee contribution
√ Offer Spending Accounts
√ Implement a cafeteria-style benefits plan
√Gain greater control over escalating benefits costs
- New benefits. Employees can be given new benefits choices, such as the opportunity to have a Health Care and/or Dependent Care Spending Account.
- Employers can also implement a means for employees to make any contributions to their coverage on a pretax basis merely by adopting a plan document that allows for this feature.
- Tax savings. Both employees and employers save on taxes and therefore increase their spendable income.
- Employees reduce taxes because the pretax contributions toward premiums or Spending Accounts are not subject to federal, state, or social security taxes. Employees save from $.25 to $.50 in taxes for every dollar they contribute.
- Employers save on the employer portion of FICA, FUTA, SUTA and workers’ Compensation premiums.
- Benefit enhancements. Employees receive benefit improvements at a time when such improvements are unlikely, due to cost pressures.
- Employer appreciation. Employers experience a renewed appreciation from their employees. The company, in effect, is giving the employee a “raise” without the cost of the raise coming from the employer.
Does the organization need to change its existing benefits plan?
No. One of the best things about Section 125 is that the company does not need to
modify its current program. The addition of Section 125 is an enrichment, not a
change. Many employers find, however, that implementing the program provides an
excellent opportunity to make benefits plan changes that meet total compensation
goals.What about administration?
The success of a flexible benefits plan depends on the ability to administer the
plan. Plans that provide for pretax employee contributions require a plan document.
Our administrative system is designed to allow for easy information management.
The system handles enrollment, account reporting, account reconciliation, check
writing and many fund management functions.What is the cost?
Very little. For most employers, the cost of implementing a Section 125 plan is
recovered through tax savings during the first year. You can begin saving money
as early as next month with the installation of a Premium Only plan. We provide
the plan document, camera-ready newsletter, and enrollment form.How can we get started?
As soon as you let us know, we will begin to prepare the documents, systems and
communications pieces for you. We can also help you set dates for employee meetings
and implementation. Contact us at 1-972-265-8397 or 1-866-79 Peigo® (73446) to get
started now!
