As a comparison, think about an employer who offers a tax-preferred retirement account, such as a 401(k). In order to have a 401(k), the employer must have a written plan document that explains information about the plan. For example, who is eligible, when can contributions be changed, what happens after employment is terminated, can loans be taken from the plan, etc. A similar, but different type of plan document is required when it comes to providing tax-free benefits for health, dental, vision, life, disability, and other qualified group insurance products.
Please note that a Premium Only Plan (POP) can generally be defined as a type of Cafeteria Plan where the only pre-tax benefits available to participants are for those of insurance premiums. If the Cafeteria Plan also provides for other pre-tax benefits, such as a Health Care FSA or Dependent Care FSA, additional plan documents are required.
Because Code Section 125 is complex, it generally requires a third party who is familiar with the tax code to prepare a plan document which meets the Cafeteria Plan requirements.
The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.