You saved tax dollars for your company *and* your employees?
Well done.
Updated on Aug 17, 2018 at 04:04 PM
Premium Only Plan
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? Take a look at the following example based on an employee that has a gross bi-weekly pay of $1,000 and a $100 health insurance deduction.
| Payroll Item |
Before POP |
After POP |
| Gross |
$1000 |
$1000 |
| Pre-Tax Deductions |
$0 |
$100 |
| Taxable Gross |
$1000 |
$900 |
| Soc Sec/Medicare |
$76.50 |
$68.86 |
| Federal Withholding |
$100 |
$87 |
| Post-Tax Deductions |
$100 |
$0 |
| Net Pay |
$723.50 |
$744.14 |
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.
Sign up For a Premium Only Plan For only $99!
You do not need to be a PayMaster payroll client to take advantage of having us prepare your plan documents.