Premium Only Plan (POP)
Save on group insurance premiums with pre-tax dollars
For some employers, Premium Only Plans (POPs) are a great solution! These Plans are for employers who do not want to offer a full Flexible Spending Account (FSA) Plan, but still want to offer a tax benefit for their eligible employees.
A POP is a Section 125 Cafeteria Plan that allows employer-sponsored premium payments to be paid by the employee on a pre-tax basis instead of after-tax. Coverage may include the following:
• Group Medical
• Group Dental
• Group Vision
• Group Disability
• Group Term Life Insurance
The result is a tax savings for employers and employees alike!
Why offer a POP?
A POP provides a cost-effective alternative to satisfy an employer's legal obligation when offering a pre-tax option for employer-sponsored benefits such as group insurance, or a Health Savings Account (HSA). However, it does not provide the same services and benefits as those available through a standard Flexible Spending Account (FSA).
Employer Benefits
-
Reduces payroll taxes (including Social Security and Medicare):
for every dollar of employee contribution into the POP, employers save 7.65% FICA taxes. -
Saves on the cost of administration: the tax savings gained often covers the entire cost of Plan administration.
|
Number of POP |
|
National Average Paid |
|
Plan Year |
|
Pre-Tax Dollars |
|
30 |
x |
$300 per month |
x |
12 months |
= |
$108,000 |
Employer FICA savings = $8,262 annually
Employee/Participant Benefits
• Reduces income taxes (Federal, State, and FICA): pre-tax payroll deductions result in a lower taxable salary.
• Increases take-home pay.
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