A Premium Only Plan (POP) is a salary reduction plan that allows employees to pay group insurance premiums on a pre-tax basis.
A POP may also be called a Section 125 Premium Only Plan, Cafeteria Plan or Welfare Plan.
POP Benefits
- Employee's tax savings help to offset the cost of insurance premiums.
- Employees don't pay FICA, federal, or where applicable, state and/or local taxes on money used to pay for their portion of employer-sponsored insurance premiums or contributions to their Health Savings Account (HSA).
- Employers’ taxable payroll is reduced by the total amount of employee contributions for benefits. Lower taxable payroll benefits Employers and Employees.
- Employers can increase their employees' share of insurance premiums without negatively affecting their take-home pay.
- Employers provide employees the benefit to an increase in their take-home pay.
POP Requirements
POP plans are governed by Section 125 of the IRS tax code. Employers with a POP plan are required to have:
- A current Summary Plan Description (SPD) available to all plan participants
- A current POP Plan Document
