The key to setting up a Section 105 plan that is in compliance and enables the business to obtain the full tax-free benefits to its owners and employees is to engage the services of a qualified plan administrator and a certified public accountant (CPA). These individuals will work with the business to give guidance and ensure that the correct plan is chosen to meet the needs of the business and its employees.
When searching for a CPA, the business should ask these questions of potential candidates:
- Does the CPA have experience working with small businesses?
- Is the CPA familiar with the legal structure of the business, and is he or she aware of potential tax implications of that structure with regards to a Section 105 plan?
- Does the CPA specialize in working with businesses to determine an appropriate benefits structure for their specific type of legal entity?
- Is the CPA licensed in the state, and are they reputable?
- Are the CPA’s fees in line with what the business is able to spend?
When searching for a qualified plan administrator, the business should ask these questions of potential candidates:
- Does the plan administrator have experience with working with an entity of its particular legal structure?
- Is the plan administrator familiar with the forms that are required for Department of Labor compliance?
- Is the plan administrator able to process reimbursement claims? Do they follow HIPAA regulations?
- Can the plan administrator meet with employees to discuss the plans available and the benefits that are available to them?
- Is the plan administrator able to ensure that all forms required for Department of Labor compliance and non-discriminatory testing are completed?
- Can the plan administrator file the forms required for the Department of Labor?
Section 105 plans can provide a tremendous benefit to a business owner and its employees, but it is very important to ensure that the plan is compliant with all Department of Labor and IRS regulations, and that it is set up properly. The business owner should choose a reliable CPA and plan administrator that can assist with these tasks. Asking the questions listed above should assist greatly in making sure that the monies spent on hiring such individuals is well-spent.
Plan administrators are available through major health insurance companies, such as Cigna, United Healthcare, Aetna and Anthem. However, the health insurance marketplace can also direct business owners to approved administrators who may be a better fit for small businesses seeking to limit costs. They have a dedicated area on the website just for small businesses seeking to enroll in health insurance coverage for their employees.
CPA’s can be found through a state’s website directory of licensed, active CPA’s. They can also be found through web searches. Their practices will vary – some will concentrate on audits and assurances, while others will focus on taxes. The business should search for a firm or individual who specializes in accounting for small business taxation and strategies.
