Information for Employers


The Section 125 Premium Only Plan (POP) allows for certain employee paid group insurance premiums to be paid with pre-tax dollars through payroll deduction.

Employers Save

The Premium Only Plan saves the employer by eliminating the matching 7.65% Social Security and Medicare tax on every dollar employees contribute through payroll deduction.

Employees Save

Employees save $20 to $40 on every $100 they contribute through payroll deduction in just federal income taxes. Qualified contributions include an employee's share of employer-sponsored health, dental, disability, accident and group-term life insurance. An employee's share of contributions to a health saving account (HSA) will also qualify for tax savings when paid through payroll deduction.

The qualified premiums (if offered by employer) are:

  • Health
  • HSA Contributions
  • Prescription
  • Dental
  • Vision
  • Disability (If premiums are pre-tax, benefits are taxable)
  • Employee Group Term Life (up to $ 50,000.00)
  • Cancer
  • Medicare Supplement
  • Hospital Indemnity
  • Accident

What You Receive With Your POP Plan

POP Plan Contents Action Required
Three-ring Binder Make the "Changes to Payroll" described in Premium Only Plan Procedures.
Complete "Employer Tax Savings Worksheet" in Premium Only Plan Procedures.
Adoption Agreement & Plan Document Read the Plan Document and sign the Adoption Agreement.
Certificate of Resolution Read and sign the Certificate of Resolution and retain for your records.
Employee Brochure Distribute Employee Brochures.
Summary Plan Description (SPD) Photocopy and distribute a copy of the Summary Plan Description to each employee (all 5 pages).
Election Forms Photocopy and distribute an Election Form to each eligible employee. Election Forms must be completed and signed prior to the beginning of the plan year.
Discrimination Tests Read and perform tests.
Maintaining Your Plan and Quarterly Newsletters Read.
Internal Revenue Code Section 125 No action required.

Employer Savings Example

"Your" Company:
20 participating Employees
Without POP With POP
Average Pre-Tax Contribution $0 $3,000
Number Of Employees x 20 x 20
Total Annual Pre-Tax Employee Contributions $0 $60,000
FICA (Medicare & SS) x 0.0765 x 0.0765
Total Annual Savings (est.) $0 $4,590

Annual social security tax is based on tax rate of 7.65%. Annual pre-tax payroll deductions are based on insurance premiums averaging $250 per month per employee.