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Premium Only Plan Administration

A Premium Only Plan (POP) is a way for employees to pay their portion of their insurance premiums on a pre-tax basis. This benefit program is authorized by the IRS under section 125 of the Internal Revenue Code.

Employees can elect to have their health, dental, vision, hospitalization, cancer, accident, disability (not recommended), and group term life insurance (up to $50,000) deducted under the POP plan.

Employers also recognize a reduction in their share of Social Security and Medicare tax expense.

PayMaster will provide you with:
  • Plan Documents
  • Summary Plan Description for your Employees
  • Enrollment forms for your Employees
  • Insurance deductions on a pre-tax basis
How does it work? Here's a quick example:

Employee has a gross bi-weekly pay of $1,000 and a $100 health insurance deduction.
Payroll Item
Before POP
After POP
Pre-Tax Deductions
Taxable Gross
Soc Sec/Medicare
Federal Withholding
Post-Tax Deductions
Net Pay
As you can see in the table above, the additional take home pay for the employee is $20.64 or $536.64 annually, and the employer in this example would've saved $198.64 after POP. An employer will also recognize a tax savings on the unemployment taxes too; as long as the employee's YTD earnings are less than the state limit of taxable wages.