Premium-only plans, or POP plans, are a unique form of healthcare assistance, for while developed to increase the affordability and accessibility of health care to individual employees, POP plans simultaneously decrease company expenses and increase employee retention.
Employers subscribing to section 125 premium-only plans deduct their employee’s contributions, a predetermined amount agreed upon before the start of the plan year before taxes are withdrawn from their pay. Find out more about premium only plan compliance services via https://www.cxcsolutions.com/compliance/premium-only-plan/.
While this increases the take-home pay of the employee, employers can look to the major annual tax benefit for the most beneficial aspect of POP plans. Because the contributions are withdrawn tax-free, employers avoid incurring the increased taxes they would otherwise accumulate. The tax-free nature of the contributions saves employers impressive FICA taxes, saving them hundreds of dollars every year they remain compliant.
Employers interested in complying with POP plans and the financial benefits they offer should consider the steps required to subscribe as the first of the year draws close. Employees choosing to participate in the premium-only plan must designate the amount of capital they will be contributing at least 90 days before the start of the plan year.
The IRS code requires that Summary Plan Descriptions (SPD) must be generated and handed out to participants and that they must be filed to the Department of Labor within 120 days of the plan's initial date. Employers should not be deterred by the initial price of a subscription as any cost involved with acquiring an IRS section 125 premium-only plan is usually recovered in the first year of the plan's operation via the tax savings it provides.