Basically, a cafeteria plan allows employees to either:

• Avail benefits like health insurance or life insurance on a pretax basis, or
• Receive a comparable yet taxable—benefit in cash.

What is Premium-only section 125 plan POP?

This plan allows your employees to pay their insurance premiums with pretax dollars. However, the plan isn’t actually insurance itself and you would still have to offer group health insurance separately. 

This POP may include a “cash-in-lieu of benefits” provision for employees who don’t wish to have coverage under the group plan. Employees who are enrolled in any other group health plan (like a plan from a spouse or parent) can opt to receive a fixed amount of cash instead.

If an employee prefers to opt for cash, the benefit is not allowed to discriminate based on “would be” premium costs. It must be a single, flat-dollar amount that you consistently provide to all eligible employees of your organisation. Also, it shouldn’t be given as a contribution towards any other individual health insurance. 

Is health insurance pretax with a Premium Only Section 125 Plan POP?

Yes, it is! As per the section, Employee contributions to group health insurance premiums are pretax as long as a Premium only Section 125 plan POP is in place. Or else, their contributions are taxed.

However, Employer contributions are pretax always.     

What are the benefits of a Section 125 POP?

Being able to pay for premiums using pretax dollars is the most exciting benefit for all employees, but it’s also a win for the employer as well. The amount your employees contribute is deducted from their total wages, hence it reduces the amount of employee payroll taxes you are set to pay.

Premium Only Section 125 Plan POP isn’t just applicable to health insurance, either. These cafeteria plan advantages can be applied to premiums for other group insurance products as well.

Is there any difference between a POP and a full Section 125 plan?

Yes, they are different – Read on to learn how!

With a POP plan, an employee is eligible for benefit premiums. Whereas health savings account (HSA) contributions can be made on pretax grounds. 

On the other hand, A full Section 125 plan also allows you to subtract eligible contributions to flexible savings accounts (FSAs); dependent child care on a pretax basis. 

Are POPs subject to ERISA requirements?

Yes! Let us explain and provide you information on the same. The Employee Retirement Income Security Act of 1974 (ERISA) refers to a federal law which sets minimum standards for most of the voluntary retirement and health plans. Even though a POP is actually an ERISA plan, the benefits paid through it are. 

The employer should be well informed that all reporting and disclosure requirements apply to every ERISA-covered benefits; for example, group health insurance, dental, and disability. 

General ERISA requirements may include:

• Summary plan descriptions of the plan
• Well-Written plan documentation
• Form 5500 filings for certain specified plans

DF Insurance is a top notch financial institution providing world class solution for regulatory compliance requirements. We have a team of highly experienced professionals who provide exceptional assistance to all employers associated with us in saving up on group insurance plans with pre-tax dollars and also ensuring employees do not have to compromise on any health benefit coverage. Call us now at (877) 935-6744 – We are within your reach always!