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Section 125 Plans

Although Section 125 plans are generally not subject to ERISA, they must comply with Section 125 of the Internal Revenue Code. Code Section 125 imposes numerous administrative and compliance requirements that are very similar to those that apply to qualified retirement plans. ABP's experience with qualified plans allows us to offer the following services to plan sponsors to help them satisfy these requirements:

In order for plan sponsors and participants to enjoy the tax benefits provided under Section 125 of the code, a fundamental requirement is that the plan be maintained under a written plan document and that disclosures be provided to employees through an Summary Plan Description (SPD) or similar document. Employers who deduct employees' shares of medical or other insurance premiums on a pre-tax basis without satisfying these fundamental requirements are subjecting themselves and their employees to significant financial risk.

ABP offers plan document and SPD preparation services both for basic Section125 Premium Conversion Plans and more complicate Cafeteria Plans that include health reimbursement and dependent care reimbursement flexible spending accounts.  ABP works with employers to identify each component and appropriately incorporate those provisions into formal plan documentation.

Employers who sponsor Section 125 plans must be able to demonstrate that their plans do not discriminate in favor of key employees and highly-compensated individuals. ABP provides worksheets and technical guidance to facilitate required compliance testing.

Compliance Consulting

In addition to discrimination testing, Section 125 plans are subject to various operational requirements. This includes documenting participant benefit elections, complying with the "use it or lose it" rule and "change in status" rules, and permitted reimbursement rules for plans that include health reimbursement provisions.


ABP support personnel are available throughout the year to answer questions from the employer's designated contact on these and other technical matters.

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ABP employs a fee for service model.  We use a standard fee schedule and engage all clients with an administrative services agreement that typically identifies a flat dollar fee for each defined provision and elected service. Time and charges billing applies only to unusual situations where it is not possible to precisely identify the scope of work.

Need more details? Contact us

We are here to assist. Contact us by phone or email.

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