Code where the Treasury IRS lays out the rules for employers wanting to allow employees the option of pre-tax salary deductions to pay group health and related insurance premiums. Traditionally POP plans have been used in combination with employer-sponsored group health insurance plans.
Section 125 Plans
THE FOLLOWING SAMPLE PREMIUM ONLY PLAN DOCUMENT IS PROVIDED MERELY TO ASSIST IN THE ESTABLISHMENT OF A PREMIUM ONLY CAFETERIA PLAN UNDER SECTION 125 OF THE INTERNAL REVENUE CODE.
Section 125 pop plan. As many employers may be well aware by now a Premium Only Plan POP Plan or Section 125 allows for employees health insurance premiums to be deducted with the use of pre-tax dollars thereby resulting in substantial tax savings for both parties. This can save employees up to 40 on income taxes and. IRS Section 125 Premium only Plan pre-tax dollars.
A premium only plan or POP allows employees to pay their portion of insurance premiums with pretax dollars. The formal definition of a Section 125 plan to pre-tax benefits says. A POP plan is used when health insurance dental insurance andor vision insurance are the only benefits that the employees will be paying for on a pre-tax basis.
The POP does this by eliminating the 765 in employer matching Social Security and Medicare taxes and in some cases Federal and State unemployment taxes. A lot of small and medium-sized businesses across the country have already availed of this tax-saving measure provided for in Section 125 of the Internal. When you begin employment in an eligible position you have 30 days to enroll.
A Section 125 POP is one of the few employee benefits that provides savings back to the employer. Section 125 is part of the IRS Code that allows employees to convert a taxable cash benefit salary into non-taxable benefits. A Section 125 plan is part of the IRS code that enables and allows employees to take taxable benefits such as a cash salary and convert them.
PREMIUM ONLY PLAN POP Plan It is the intent that this plan shall qualify as a Section 125 plan of IRC as amended from time to time. This in turn allows employees to pre-tax payments made through the plan to purchase group health insurance and supplemental benefits as well as contributions to Flexible Spending Arrangements FSAs and Health Savings. THIS SAMPLE DOCUMENT SHOULD BE REVIEWED BY THE EMPLOYERS ATTORNEY AND MODIFIED AS NECESSARY TO REFLECT ANY SPECIAL.
However employees can also use POP plans to pay individual health insurance premiums with tax-free dollars. IRS Section 125 Premium Only Plan POP - Enrollment Form. A Premium Only Plan POP is the simplest type of Section 125 Plan.
It is the easiest type of Section 125 Plan to maintain and it involves little or no annual discrimination testing. The purpose of the plan is to allow employees the opportunity to elect to pay the portion of medical insurance premium costs for which they are responsible. Section 125 is the part of the IRS Code that allows employees to purchase health insurance and other ancillary benefits tax free.
A premium only plan is the most basicand most populartype of Section 125 plan. Under a Section 125 program you may choose to pay for qualified benefit premiums beforeany taxes are deducted from employee paychecks. Section 125 Plans POP Help reduce your FICA federal and state and local taxes for your company and your employees by combining a section 125 premium only plan POP and flexible spending account FSA with your companys group health insurance.
The Core 125 Premium Only Plan POP package provides employers with everything they need to establish an IRS- and DOL-compliant tax-free Section 125 POP. All employers know this an essential part of any group health insurance and ancillary benefit program. Section 125 Premium Only Plan or a POP Plan.
IRS code Section 125 allows an employer to set up a Premium Only Plan POP where an employees insurance premium contributions can be deducted from his or her payroll on a pre-tax basis. Benefits that are typically offered within a premium only plan include health dental vision accidental death and. A plan offering only a choice between taxable benefits is not a section 125 plan.
Enrollment in the 125 POP allows active employees to reduce their taxable income by withholding certain qualifying benefit premiums BEFORE taxes. A Section 125 premium-only-plan POP is a cafeteria plan which allows employees to pay their health insurance premiums with tax-free dollars. A Section 125 POP or Cafeteria plan is a written plan Section 125 is part of the U.
A section 125 plan is the only means by which an employer can offer employees a choice between taxable and nontaxable benefits without the choice causing the benefits to become taxable.
