What is a POP and how is it beneficial for employers and their employees?
A Premium Only Plan (POP) is a type of Section 125 Cafeteria Plan that is a cost-effective alternative to satisfying an employer’s legal obligation when offering pre-tax employer-sponsored benefits. 1 A POP makes benefit programs more affordable for employees by allowing employees to pay qualified benefit premiums before any taxes are deducted from their paychecks. 2 Qualifying benefit premiums include:
- Employee Group Term Life (up to $50,000)
- Medicare Supplement
- Hospital Indemnity
A POP reduces employee’s taxable income and helps them save on FICA, federal, and state and local taxes. Employees can save 20-40% of their payroll deductions, which increases their take-home income! 2
A POP reduces employer’s payroll taxes, such as Social Security (6.20%) and Medicare (1.45%) taxes, which equates to 7.65% of all the dollars put through the plan, which is a substantial savings! 2 A POP also saves on the cost of plan administration. 2 A POP plan is also a powerful tax incentive to help recruit and retain quality employees. 3
If you have any questions or would like additional information on POPs, please contact us at (972) 673-0045 to speak with a knowledgeable Employee Benefits Specialist!