A premium only plan (POP) is the most basic and most common type of Section 125 Cafeteria Plan, allowing employees to pay employer-sponsored premiums pre-tax rather than after-tax. The following items may be covered:
What is pop eligibility?
Premium Sole Plans (POP) are a sort of Cafeteria Plan in which the only pre-tax benefit provided to employees is for health insurance premiums. When it comes to non-taxable benefits, the IRS normally has some specific requirements that must be observed. These are known as non-discrimination regulations in Cafeteria Plans, and they are in place to ensure that the plan does not discriminate in favor of highly compensated and/or key personnel.
What does pop stand for in health insurance?
Employees should be able to pay premiums on a pre-tax basis to get the most out of their group-sponsored benefit plan. However, the IRS mandates a Premium Only Plan (POP) to make payroll deductions easier.
What is Pop benefit?
When providing a pretax option for employer-sponsored benefits such as group insurance or an HSA, a POP is a cost-effective way to meet an employer’s legal responsibility. It does not offer the same services and benefits as a traditional FSA. Employer Advantages. Payroll taxes are reduced.
How does a pop plan work?
A premium only plan (POP) is an IRS-regulated, employer-sponsored benefits plan that allows employees to divert a portion of their pay to tax-free benefits. The cost of the plan’s benefits (such as health insurance or group term insurance premiums) is taken from the employee’s earnings on a pre-tax basis, allowing both the company and the employee to save money throughout the year.
Are pop plans required?
- Documents that are legally binding. Before the Section 125 POP plan takes effect, the employer must create a Plan Document and Summary Plan Description (SPD). These documents, which are issued to all employees, describe the plan’s rules. The plan document should be signed by the employer and kept on file.
- Agreement on Salary Reduction. Each eligible employee in a Section 125 POP plan has the opportunity to enter into a Salary Reduction Agreement with the employer, in which he or she agrees to the amount of pre-tax salary that will be withheld from wages for health care coverage.
- Nondiscrimination testing is a method of determining whether or not something is discriminatory. Employers are not allowed to discriminate in favor of highly compensated employees. If you have any concerns about discrimination, we recommend doing nondiscrimination testing and keeping records of the results in case of an audit.
- Salary reductions have been made. Changes to the Salary Reduction Agreement can only be made at the start of the plan year once it is in place. The only exceptions, which cannot be made retroactively, are qualifying life events, such as changes in:
How much is a POP plan?
According to the National Conference of State Legislatures (NCSL), setting up and administering a Section 125 POP plan costs about $100 per year per employee.
What is pop claim?
The premium-only plan essentially allows employees to save money on taxes by paying premiums on various types of employer-sponsored insurance with pre-tax income. The POP is frequently used to pay for health, dental, and hospital indemnity insurance.
Why do I need a premium only plan?
To you, what does a Premium Only Plan entail? Your employer may allow you to pay a portion of your insurance premiums using pre-tax cash, lowering your taxes and increasing your take-home pay. Unless you specify differently, it is automatic.
What is pop renewal?
Employers frequently hire a POP Third Party Administrator (TPA) to help them prepare the needed plan documents when they start a POP. A POP renewal is usually sent to the employer after the first year, and many employers wonder if paying the price to update the plan document is required.