A Premium Only Plan (POP) will cut payroll taxes for employees and employers, without cutting compensation, in fact it will increase take home pay. A Section 125 Premium Only Plan saves the employer and the employee money by reducing payroll taxes.
The POP works by making one simple adjustment in your payroll process. With a POP, the contributions an employee makes for insurance premiums for health, dental, disability and group term life insurance programs can be paid for pre-tax. The net result is that the employee saves at least 22% in Federal and FICA taxes. The employer also saves the 7.65% FICA / Medicare matching taxes.
Failure to properly disclose to eligible employees the rules and meet non-discrimination can result in disqualification of pretax benefits for both employees and employers. Penalties for not administering a POP plan in compliance with the law can vary depending on the nature and extent of the non-compliance. Here are some potential penalties and consequences:
It is important for employers to understand and comply with the rules and regulations governing POP plans to avoid these penalties and ensure that the plan is properly administered. Consulting with legal and tax professionals who specialize in employee benefits such as ESG can help employers navigate the complexities of compliance and minimize the risk of penalties.
POP plans are a staple in offering employees cost effective health care solutions. These tax advantaged plans can be customized to improve the group benefit offering, reducing employee cost, simultaneously offering a savings strategy for the employer.
Popular POP plan designs include: pretax premiums for group medical, dental, vision, accidental health, cancer coverages or even gap plan. These include the cost for employee and dependent coverage.