What is a POP Plan Section 125? Employers who haven't brushed up on their knowledge on the POP should start doing this as this could help them and their employees realize substantial savings on tax costs.
What Is a Section 125 Premium Only Plan?
The POP or Premium Only Plan is the most basic plan covered under Section 125 of the US tax code which provides a way for employees to pay for certain qualified benefits on a pre-tax basis. Under a POP Section 125, employees' contributions go specifically to health care coverage which includes group life insurance, group dental and vision, group disability, and group life term.
Employers and Employee Benefits
There are many advantages to starting a Section 125 plan within an organization but the greatest benefit that can be had is the tax savings. Since insurance premiums are paid using pre-tax dollars, both employees and employers get to realize substantial savings on tax costs.
For the amount that goes to insurance contribution covered by the POP, the employee can get to save up to 40% of the actual premium cost. The Federal Insurance Contribution Act (FICA) tax, state, local, and other federal taxes will all be reduced once contributions are made under a POP Section 125 plan. With the savings from these taxes, employees can bring home a bigger paycheck every month, or be cushioned from the ever increasing costs of health insurance.
And how does the employer save? Once an employer sponsors a Section 125 POP for the company's employees, the employer will be seeing some relevant cuts in tax costs such as the corresponding 7.65% FICA tax and 0.80% FUTA tax. Depending on where the business is located, the employer may also avoid SUTA or SUI or any state-mandated workers? compensation tax on the amount of the contribution.
Which Employers Can Sponsor a Section 125 POP?
Practically all employers can sponsor a Premium Only Plan: Professional Corporations, Limited Liability Corporations (LLCs), S Corporations, Regular Corporations, Partnerships, Sole Proprietorships, and Non-Profits. Once the plan is set up, employees of these businesses can participate.
In some states, it is required that the employer sponsor a POP Section 125 if the employees' are paying even just a portion of their health insurance premiums. If insurance premiums are withheld pre-tax, then employers should automatically sponsor a POP as well.
The best thing about Section 125 plans is that businesses of any size can participate: small, mid-sized, or large corporations. With a POP, employers can provide their employees with the needed benefits and gain savings for the business at the same time.
What Is a Section 125 Premium Only Plan?
The POP or Premium Only Plan is the most basic plan covered under Section 125 of the US tax code which provides a way for employees to pay for certain qualified benefits on a pre-tax basis. Under a POP Section 125, employees' contributions go specifically to health care coverage which includes group life insurance, group dental and vision, group disability, and group life term.
Employers and Employee Benefits
There are many advantages to starting a Section 125 plan within an organization but the greatest benefit that can be had is the tax savings. Since insurance premiums are paid using pre-tax dollars, both employees and employers get to realize substantial savings on tax costs.
For the amount that goes to insurance contribution covered by the POP, the employee can get to save up to 40% of the actual premium cost. The Federal Insurance Contribution Act (FICA) tax, state, local, and other federal taxes will all be reduced once contributions are made under a POP Section 125 plan. With the savings from these taxes, employees can bring home a bigger paycheck every month, or be cushioned from the ever increasing costs of health insurance.
And how does the employer save? Once an employer sponsors a Section 125 POP for the company's employees, the employer will be seeing some relevant cuts in tax costs such as the corresponding 7.65% FICA tax and 0.80% FUTA tax. Depending on where the business is located, the employer may also avoid SUTA or SUI or any state-mandated workers? compensation tax on the amount of the contribution.
Which Employers Can Sponsor a Section 125 POP?
Practically all employers can sponsor a Premium Only Plan: Professional Corporations, Limited Liability Corporations (LLCs), S Corporations, Regular Corporations, Partnerships, Sole Proprietorships, and Non-Profits. Once the plan is set up, employees of these businesses can participate.
In some states, it is required that the employer sponsor a POP Section 125 if the employees' are paying even just a portion of their health insurance premiums. If insurance premiums are withheld pre-tax, then employers should automatically sponsor a POP as well.
The best thing about Section 125 plans is that businesses of any size can participate: small, mid-sized, or large corporations. With a POP, employers can provide their employees with the needed benefits and gain savings for the business at the same time.
About the Author:
While they offer many advantages, POP Section 125 plans remain underutilized because not too many employers are aware of it. Drop by our site to know more about the Premium Only Plan and how you can get your POP Plan documents in a timely, secure, and cost-effective manner.
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