If your employees pay a portion of their health insurance costs, you may be able to reduce your payroll taxes, and give workers a little extra in their checks each and every week. How? By letting Advantage handle your payroll deductions for insurance premiums with a Section 125 approved Premium Only Plan.
A Premium Only Plan, or POP, allows employees to make contributions to their group, dental, life and disability insurance cost before taxes are calculated.
Under Section 125 of the Internal Revenue Code, employees save FICA, federal income tax, and in most cases, state income tax on their health insurance deductions with every paycheck.
You can save, too, because eligible businesses do not pay FICA matches or FUTA tax on employee medical deductions. In about half of the states, these contributions may be exempt from SUTA. For many small to medium-sized companies, the savings can be impressive.
But POP paperwork is time-consuming. IRS eligibility standards are stringent and, of course, very complicated. Until recently, few smaller companies could afford to enjoy all the benefits of a POP.
Of course, no one is more qualified to sort through the red tape for you than Advantage.
We offer POP services, making it easy for you and your employees to get everything that’s coming to you.
Our Premium Only Plan services include:
- Sample Plan Document
- Employee enrollment forms
- Enrollment and annual re-enrollment administration
- Non-discrimination and other federal eligibility testing
- IRS Form 5500 filing when required
- Annual Summary report documentation
Potential Employee Savings Example:
Here’s how much an employee grossing $450 each week could save with a Premium Only Plan.
|After Tax Deductions||Pre-Tax Deductions|
|Federal Tax 15%||$67.50||$60.00|
|State Tax 2%||$9.00||$9.00|
|Difference: $12.33 month ($641.16 yr.)|
Potential Employer Savings:
Here’s how much you could save on this employee if your business had a Premium Only Plan.
|Difference: $3.83 month ($199.16 yr.)|
A small business with 10 employees participating in the above scenario would realize saving of at least $1,991.60 (10 x $199.16) in FICA match alone. Contributions to a Premium Only Plan are also exempt from FUTA and in many states SUTA.