One of the advantages of an employer-sponsored group health insurance plan is the ability for the employees to pay for their portion of the premiums with pre-tax dollars, which obviously stretches the value of that money. We find that many small employers, however, assume that they can implement pre-tax premium payments automatically upon establishing their group health insurance plan. This is simply not true. An employer must establish a formal “POP plan” (“Premium Only Plan”) in order to do so. That probably raises a few questions:
What is a P.O.P. Plan?
A POP Plan is provided under Section 125 of the Internal Revenue Code, and is designed to allow employees to pay for their share of qualified group insurance premiums with Pre-Tax dollars.
How does a P.O.P. plan benefit me as an employee?
As an employee, you’re helped by an increase in your take home pay. By paying your portion of the premiums with pre-tax dollars, you’re able to reduce the amount of taxes you pay, which increases your take home pay.
What premiums can I pay pre-tax through the P.O.P. plan?
Medical, dental, vision, group term life amounts up to $50,000, critical illness, accident, short-term & long-term disability income, and cancer plans are examples of the more common benefits paid through P.O.P. plans.
