The IRS has instituted a provision in Section 125 of their code. This provision allows for a simple change in your company’s payroll process that reduces your taxable payroll. Every premium contribution your employees make will be deducted from your overall taxable payroll amount. Here’s what you and your employees can expect with a Premium Only Plan or POP.
Employer Benefits
Lower Taxes – Every small business owner needs to take advantage of every tax break they can find. By using a POP plan, you are immediately lowering your taxes, which means that you can turn this additional revenue into more options for your business.
Happier Employees – When your employees make more money, they end up happier. By offering them the ability to use a POP plan, you are automatically putting more money into their pockets. You can use this fact as a way to attract and retain quality employees, particularly if other companies in your industry do not offer this type of plan.
Employee Benefits
Lower Taxes – In addition to lowering your own taxes, your employees will also reap this benefit from a POP plan. This reduction in taxes can be quite significant. This is achieved because your employees are allowed to make contributions to the POP plan with pre-tax dollars. When they become a member of a POP plan, they will also see a reduction in their FICA, federal and state taxes, when applicable. For employees who may have trouble making contributions towards their health plan, a POP plan can allow them to save money on their health plan through the benefits of lower taxes. Even though the premium amount may be the same as a regular plan, the tax savings that they will experience can help make up the difference.
More Take-Home Pay – One of the most popular benefits of a POP plan is the ability for your employees to take-home more pay each month. With their contributions coming as pre-tax dollars and the reduction in their tax payments, this results into automatic savings that they can see on their paycheck each month.
Tags: group health, pre-tax
