What is Section 125 POP Plan?
What is Section 125 POP Plan?
A Section 125 premium-only-plan (POP), is a cafeteria plan which allows employees to pay their health insurance premiums with tax-free dollars. Using a Section 125 POP to pay for insurance premiums benefits both employers and their employees.
Is a pop plan required?
POP plans are governed by Section 125 of the IRS tax code. Employers with a POP plan are required to have: A current Summary Plan Description (SPD) available to all plan participants.
How does a pop plan work?
A premium only plan (POP) is the most basic – and most popular – type of Section 125 Cafeteria Plan that allows employer-sponsored premium payments to be paid by the employee on a pre-tax basis instead of after-tax.
What is a pop deduction?
IRS code Section 125 allows an employer to set up a Premium Only Plan (POP), where an employee’s insurance premium contributions can be deducted from his or her payroll on a pre-tax basis. This can save employees up to 40% on income taxes and payroll taxes. The employer also saves on these taxes.
What is a pop insurance plan?
A premium only plan (POP) is the most basic – and most popular – type of Section 125 Cafeteria Plan that allows employer-sponsored premium payments to be paid by the employee on a pre-tax basis instead of after-tax. Coverage may include the following: Group Medical. Group Dental.
What are pop documents?
A POP Plan is also known as a Section 125 (or Cafeteria 125 plan). It allows employees to pay their premiums for their health insurance tax free. In order to allow your employees to pretax certain benefits on their paychecks, you need to have a compliant section 125 premium only plan document (POP).
Are pop plans subject to Erisa?
A POP is not itself an ERISA plan, but the health and welfare benefits being paid for through the POP are covered by ERISA. So, ERISA reporting and disclosure requirements will apply to any ERISA covered benefit (ex. group medical, dental, STD, LTD, etc.) offered through a POP.
Is non discrimination testing required for POP plans?
If you have a Premium Only Plan (POP), the IRS requires you to submit to non-discrimination testing once a year. The reason for nondiscrimination testing is to prevent highly compensated employees from taking advantage of the benefits that these plans provide for employers and employees alike.
Do pop plans expire?
Yes. Employers must keep their POP plan documents up to date, as required by the law.
What is a section 125 cafeteria plan?
Section 125 Cafeteria plans provide savings and benefits for both the employer and the employees
What are the benefits of Section 125 cafeteria plan?
A section 125 or “cafeteria” plan allows employees to withhold a portion of their pre-tax salary to cover certain medical or child-care expenses. Because these benefits are free from federal and state income taxes, an employee’s taxable income is reduced, which increases the percentage of their take-home pay.
What is a section 125 plan, anyway?
A Section 125 plan is part of the IRS code that enables and allows employees to take taxable benefits , such as a cash salary, and convert them into nontaxable benefits. These benefits may be deducted from an employee’s paycheck before taxes are paid.
What is IRS Section 125 cafeteria plan?
A Cafeteria Plan is a reimbursement plan governed by IRS Section 125 which allows employees to contribute a certain amount of their gross income to a designated account or accounts before taxes are calculated.
