When it comes to offering competitive employee benefits while reducing tax liability, few options are as effective as a Section 125 Premium Only Plan (POP). A properly structured POP plan document not only helps employers cut payroll taxes but also allows employees to pay for eligible insurance premiums with pre-tax dollars—boosting overall take-home pay and employee satisfaction.

In today's competitive market, businesses of all sizes can benefit from understanding how a Section 125 plan design works and why a compliant, up-to-date POP plan document is essential.

What is a POP Plan Document?

A POP (Premium Only Plan) plan document is a legal document that outlines the rules and structure of a Section 125 plan. It enables employees to contribute to their portion of health, dental, vision, and other qualified insurance premiums on a pre-tax basis, lowering their taxable income.

This document must be adopted by the employer and made available to employees to ensure IRS compliance. Without a formal POP document in place, employers risk losing valuable tax savings and may be subject to penalties in the event of an audit.

What is a Section 125 Plan Design?

A Section 125 plan is named after Section 125 of the Internal Revenue Code, which allows for cafeteria-style benefit options. The POP plan design is one of the most popular and simplest types of Section 125 plans because it only applies to pre-tax premium deductions.

Here's what's typically included in a Section 125 POP plan design:

  • Eligibility Rules – Defines who can participate in the plan (e.g., full-time employees after 30 days).

  • Premium Options – Covers eligible insurance benefits like health, dental, vision, or supplemental plans.

  • Plan Year and Elections – Specifies the plan year and employee election process.

  • Tax-Saving Mechanism – Outlines how pre-tax contributions reduce taxable income for employees and reduce FICA and FUTA taxes for employers.

Key Benefits of Implementing a POP Plan

Implementing a well-designed Section 125 POP plan offers several financial and operational advantages:

For Employers:

  • Payroll Tax Savings – Employers save around 7.65% on payroll taxes for every dollar employees contribute pre-tax.

  • Reduced Taxable Wages – Helps lower overall payroll tax liability.

  • Stronger Benefits Package – Makes your company more attractive in a competitive job market.

For Employees:

  • Increased Take-Home Pay – Lower taxable income means more money in each paycheck.

  • No Impact on Coverage – Employees enjoy the same benefits while saving money on premiums.

  • Flexible Benefits Enrollment – Aligns with open enrollment and life event changes.

Get Started with a POP Plan Today

Setting up a compliant POP plan document is simple and affordable, especially with expert assistance. Businesses looking to boost their benefits offering while minimizing tax obligations can find a smart, scalable solution with a customized Section 125 plan design.

To learn more about how your business can save and stay compliant, explore the benefits of POP plans at this article on EINPresswire.

Don't miss the opportunity to save big—both for your company and your employees.

 

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