section 125 premium only plan

Section 125 

Premium Only Plan (POP)


A Section 125 Premium Only Plan (POP) is governed by Section 125 of the IRS tax code. A Premium Only Plan or POP Plan is also called a Cafeteria Plan or Flexible Benefits Plan (FSA). Employees enrolled in Cafeteria plans can set aside insurance premiums and other pretax that they can use for certain qualified medical and child care expenses since more participants in the program equate to more tax savings for the employer.

The Section 125 Premium Only Plan is an option for employers who wish to provide an additional benefit to their employees without giving any other form of coverage. It is the only means for an employer to provide coverage for the family members of employees without providing other forms of insurance, including a general insurer. The plan may make benefits available to employees, their spouses and dependents. It may also include coverage of former employees but cannot exist primarily for them. The employer contributes to each employee’s plan to promote increased participation by those not yet in the section 125 plan. 

We offer a way for you to control the cost of employee benefits and enjoy substantial savings. Premium Only Plans or POP Plans are governed by Section 125 of the IRS tax code. The employer saves on the amount of matching FICA tax the employee has withheld from their paychecks on a pretax basis while the employee saves Federal, State and FICA taxes. Implementing a Cafeteria Plan is a win-win benefit for everyone.

Section 125 POP Services

Section 125 Premium Only Plan Services

We offer a Low Annual Fee

While most companies have yearly POP document fees and charge per amendment, our low annual fee includes all modifications and critical updates to your documents.

Fast, Easy and Accurate, Gauranteed!

We automatically keep your documents up to date with IRS requirements. We provide everything you need for a formal POP plan document. Best of all, it only takes a few minutes to create.

Meet Federal Law Requirements

We ensure you meet all Federal law requirements by submitting a Section 125 if you offer tax-free benefits to your employees.

Plan Documents are Updated Automatically

Many companies have a Section 125 Premium Only Plan document on file, but it is outdated. Our automated, real-time updates make staying in compliance a breeze.

We make it easy to file your Section 125 POP Documents

HR Service, Inc. is a leader in preparing documents for Section 125 Premium Only Plans, SPDs, and HRAs. You can rest assured that your company is safe and compliant with the IRS when using our services.

Section 125 - Premium Only Plan FAQ

  1. The most significant advantage of a  POP Document is its tax-advantaged status.
  2. When you pay for insurance through a Section 125 POP plan, the premiums are deducted from your paycheck on a pretax basis – that means they come out of your taxable income, reducing both your income tax and FICA taxes. It's like getting an instant pay raise!
  3. Section 125 cafeteria plan allows an employee to reduce the gross income amount used to calculate Federal, Social Security, and some State taxes. This amounts to a savings of between 25% and 40% of every dollar they contribute to the plan. 
  4. Remind your employer that he gets this benefit too – his matching share of FICA and Medicare are reduced, as are FUTA and possibly state unemployment taxes.
  5. Employers can increase their employees' share of insurance premiums without negatively affecting their take-home pay.
  6. Employers need to ensure the rules outlined in the plan document and SPD are followed. Failure to administer a plan in accordance with the written terms of the plan and the Internal Revenue Code can result in the loss of the benefits' pretax status.
  7. New employees must receive a copy of their plan sponsor’s latest Summary Plan Description within 90 days after becoming covered by the plan. Plan sponsors are not required to file a POP Document with the Department of Labor (DOL), although they are required to provide it to DOL upon request.

The maximum criminal penalties for ERISA include fines of up to $100,000 and possibly ten years in jail. Businesses charged with ERISA violations can face criminal fines of up to $500,000, in addition to any civil liability.

Plan sponsor may be charged $110/day if it does not provide plan document, SPD, or Summary of Material Modifications (SMM) within 30 days of individual's written request. Failure to furnish plan-related information requested by the DOL carries a penalty of up to $161 per day, not to exceed $1,613 per request. Under ERISA, plan administrators must furnish to the DOL, upon request, any documents relating to the employee benefit plan.

  • Health;
  • Dental;
  • Vision;
  • Accidental death and dismemberment;
    Short- and long-term disability;

The plan document needs an update whenever there is a change in your plan or in tax and health care law that requires an update.

Employer contributions to the cafeteria plan are usually made pursuant to salary reduction agreements between the employer and the employee in which the employee agrees to contribute a portion of his or her salary on a pre-tax basis to pay for the qualified benefits.

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