A premium only plan (POP) is the most basic – and most popular – type of 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. Many employers are not compliant with this important IRS regulation because they don't have a formal POP document memorializing their plan. Employers often aren't aware of this requirement and payroll processors assume everything is in place and take deductions from employees on a pre-tax basis. A POP plan allows an employer to take pre-tax deductions on coverage that may include the following:
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).
Employer Advantages:
Number of POP Participants | National Average Paid Employee Premiums | Plan Year | Pre-Tax Dollars Spent Per Year | |||
30 | x | $300 per month | x | 12 months | = | $108,000 |
Employer FICA savings = $8,262 annually
Employer Disadvantages:
Employee/Participant Advantages:
Employee/Participant Disadvantages:
Remain Compliant With Our POP Service:
NOTES:
S-Corp Owner - with 2% or more stock cannot participate in plan (Attribution Rules apply which also excludes a spouse, children, parents and grandparents of a more than 2% shareholder)
C-Corp - subject to non-discrimination testing
LLC, LLP, Partnership, Sole Proprietorship owners - cannot participate in the plan
PC, PLC, PLLC - depends on how taxes are filed.
C-Corp - subject to non-discrimination testing
S-Corp - No
Section 125 - Premium Only Plan Through our Vendor | ||
# of Eligible Employees | Year 1 | Year 2 and After |
2+ | $100 | $100 |
Vendor Generates and Provides:
Other types of Section 125 Plans include:
How can we help you?
Contact info@GoCGO.com
This blog is for educational and/or informational purposes only and does not constitute legal advice.