Premium Only Plan (POP) - KAIT Jonesboro, AR - Region 8 News, weather, sports

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Premium Only Plan (POP)




Premium Only Plan (POP)
This plan allows employees to make their contributions to group health and group term life insurance with pre-tax dollars. A Premium Only Plan creates no new benefits. The employer is simply offering a way to obtain favorable tax treatment on benefits already offered.

Here's how the Premium Only Plan works:

  • Employees' premium contributions are automatically deducted from their salaries before taxes are taken out.
  • Taxable income is reduced by the amount contributed, so employees pay less in taxes and have more take-home pay.
  • With employee pre-tax income lowered, employers pay less in Social Security (FICA) payroll taxes. (A business should consult their tax advisor for applicable state legislation.)

A POP is the simplest type of section 125 plan, and it requires low maintenance once it's set up.

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