Those who are not yet implenting a POP Plan Section 125 within their organization are missing out on a good deal of benefits not only for the business itself but also for the company employees.
Defining POP Section 125
The Premium Only Plan or POP is one of the most basic plans offered under Section 125 of the Internal Revenue Code which states that employee contributions intended for specific qualified benefits can be withheld with the use of pre-tax dollars. A POP Section 125 Plan in particular, provides for employees’ health care insurance and such coverage includes group life insurance, dental and vision, group disability, and group life term.
Benefits of a POP Section 125 Plan
No doubt about it, the tax savings is the biggest benefit that can be had with from a Section 125 Plan. Since insurance premiums are paid using pre-tax dollars, both employees and employers get to realize substantial savings on tax costs.
For the amount that goes to insurance contribution covered by the POP, the employee can get to save up to 40% of the actual premium cost. With the payments run under a POP Section 125 plan, the tax that goes to Federal Insurance Contribution Act or FICA, as well as other federal, state, and local taxes will see a significant drop. With the savings from these taxes, employees can bring home a bigger paycheck every month, or be cushioned from the ever increasing costs of health insurance.
And how does the employer save? Once an employer sponsors a Section 125 POP for the company’s employees, the employer will be seeing some relevant cuts in tax costs such as the corresponding 7.65% FICA tax and 0.80% FUTA tax. Depending on where the business is located, the employer may also avoid SUTA or SUI or any state-mandated workers? compensation tax on the amount of the contribution.
Who Are Qualified to Participate in a Section 125 POP?
All types of employers can establish a POP within their company: Professional Corporations, Limited Liability Corporations (LLCs), Regular Corporations, Partnerships, Non-Profits, and Sole Proprietorships. Subsequently, all employees of these businesses can enroll or participate in the plan.
In some states, it is required that the employer sponsor a POP Section 125 if the employees’ are paying even just a portion of their health insurance premiums. In addition, employers should automatically implement a Section 125 Premium Only Plan if they are deducting premiums pre-tax.
The best thing about Section 125 plans is that businesses of any size can participate: small, mid-sized, or large corporations. With a POP, employers can offer their employees with the right benefits and and still get to achieve substantial savings.
Despite their many benefits, POP Section 125 plans remain underutilized because not too many employers are aware of it. Visit us to know more about the Premium Only Plan and how you can get your POP Plan documents in a timely, secure, and cost-effective manner.
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