What is a POP Plan?

"Section 125 of the Internal Revenue Code allows tax savings for employers and employees.  These Section 125 plans, often called 'Cafeteria' or 'POP' plans are one of the few employee benefits that offer advantages to both employers and employees."

About the $79 POP Plan
The Premium Only Plan (POP) is the most common of all cafeteria plans. It’s most often used in conjunction with the other cafeteria plan types (e.g., Flexible Spending Account).  In a POP, the employees’ portion of group health and other premiums is payroll deducted on a pre-tax basis, resulting in lower income taxes.

Group insurance premiums that you can deduct pre-tax include:
Group Health Insurance
Dental / Vision Insurance   
Accident Insurance  / Supplemental Insurance           
Disability Insurance*                      
Group Term Life Insurance**

*Disability Insurance benefits are taxable when premiums are placed pre-tax.
**Term life limit: up to $50,000 pre-tax on employee only; spouse/dependent life not available.
How Does it Work?
There’s no need to sign up and there’s no paperwork to fill out. The eligible group insurance premiums will be automatically deducted pre-tax unless you choose not to participate. If you don’t want to participate in this benefit, you’ll need to complete an Employee Election Form which is included in your Premium Only Plan document.
Advantages for the Employer:

Financial Benefits.
The employer saves money on the amount of matching FICA tax the employee has withheld from their wages on a pre-tax basis which is estimated at 7.65%.  With the lower taxable income for the employee, there can also be a savings on an employers workers compensation insurance since it will cover a lower payroll amount with the premium only cafeteria plan.

Simple setup and low cost
Employers are able to add an additional benefit to their group insurance programs with one simple plan document.  Premium Only Plans are an effective way for employers to allow employees to pay for employer provided group health insurance by paying their portion using pre-tax dollars.  This creates a more competitive benefit program, while generating FICA tax savings for the employer.
Advantages for Employees:

Higher Take-Home Pay.
Employees that are paying their group insurance premiums pre-tax, will realize a higher net take home pay as illustrated in the example above.   Employees save Federal, State and FICA taxes.

Make Health Premiums a little more affordable
With participating employees paying for their health insurance premiums on a pre-tax basis, they effectively can lower the amount they are paying in health premiums by 20% to 39% depending on their overall tax bracket.  By paying for their group insurance premiums pre-tax, this tax savings helps defray the overall cost of their insurance premiums. 

Same day, complete plan document sent via email!

​Refund Policy:  Purchaser understands that goods and services provided by Cafeteria Plan Direct are non-refundable. Orders cancelled prior to shipping are subject to cancellation fees applied to the cost of goods and services provided during the review, draft, and preparation of your order.

FAQ:

  • What does Cafeteria plan cover?
​Premium Only Cafeteria Plans allows employees to pay certain qualified expenses (such as health insurance premiums) on a pre-tax basis, thereby reducing their total taxable income and increasing their spendable/take-home income.

  • Are Cafeteria plans exempt from FICA? 
Payroll FICA contributions are made directly from gross, or pre-tax, wages.  Although 401K and other retirement plans are funded from pre-tax wages, they are not exempt from FICA taxes, but other employee benefits like health insurance and Section 125 Premium Only Cafeteria plans are simple options to reduce your payroll tax liability.

  • Are Cafeteria plans taxable​?
Unlike traditional 401(k) plans, Premium Only Cafeteria plans provide benefits to employees pre-retirement.  While pre-tax contributions to a 401(k) and other qualified retirement plans are still taxable in the year they are withdrawn, some benefits received through cafeteria plans are fully tax-exempt.

  • Are Cafeteria plans subject to ERISA?​
Cafeteria plans are considered employer-sponsored benefit plans that provide both taxable and non-taxable, benefit options for employees.  Cafeteria plan benefits may be subject to Federal Insurance Contributions Act (FICA) and Federal Unemployment Tax Act (FUTA) taxes.

  • Are Cafeteria plans tax deductions?
The majority of  cafeteria plans today are designed through a "salary redirection agreement", which is considered a payroll deduction.  Reasons for implementing a Premium Only Cafeteria  plan are primarily for the tax savings advantages for both the employer and employee.

  • Are Cafeteria plans pre tax?
​A Premium Only Cafeteria Plan allows employees to pay certain qualified expenses (such as health insurance premiums) on a pre-tax basis, thus lowering their total taxable income and increasing their net paycheck/take-home pay.

  • Are Cafeteria plans deductible​
In most instances, qualified benefits under a cafeteria plan are not subject to FICA, FUTA, Medicare tax, or income tax withholding.  If an employee chooses to receive cash/income instead of any qualified benefit, it is treated as wages and subject to all employment taxes.

  • Where is Cafeteria plan reported on W-2?
​Pre-tax health insurance premiums and medical flexible spending account (FSA) contributions are deducted from actual gross to arrive at W-2 Box 1 (and other boxes), but they do *NOT* have to be reported separately on your W-2.

  • What is Cafeteria HSA plan?
​Contributions to an HSA (Health Savings Account) may be made 'pre-tax' under a Section 125 Premium Only Cafeteria Plan.  Employee contributions are deducted pre-tax through payroll deduction. Both the employee and/or employer, may make contributions to the HSA account.

  • How is a Cafeteria plan reported on W-2?
​Premium Only Cafeteria plans include employer-sponsored benefits that are exempt from Federal and in most cases, State taxes.  Employees pay for these benefits with pre-tax dollars, which an employer won't include in their taxable wages on their W-2.

  • How are Cafeteria plans funded?
​Under IRC Section 125, participants may make an election between benefits and regular taxable income.  While the cost of coverage is typically paid by employees through salary reductions, employers are permitted to contribute to the cost of benefits.  Employees can reduce income on a pre-tax basis or be allowed to contribute after-tax dollars (i.e., payroll deduction) to pay for benefits. Employers may contribute toward the purchase of an employees cafeteria plan benefits.  Employer contributions can be a 'match' on what an employee contributes towards their benefits. 



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