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.
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.