Section 125, Premium Only Plan, or a POP Plan, is an essential part of any employer group health insurance and ancillary benefit program. Section 125 is the part of the IRS Code that allows employees to purchase health insurance and other health and life insurance benefits tax-free.
A POP Plan legally allows your employees to pay their portion of their health insurance premiums, other health and life insurance benefits using pre-tax dollars. A Premium Only Plan is unique in that it benefits both the employee and employer financially. The POP Plan does this by reducing the employee’s gross salary by the amount of the employee’s pre-tax contribution, and for the employer by eliminating the employer matching Social Security and Medicare taxes(7.65%).
