Cafeteria Plan.

A Cafeteria Plan is a separate written plan maintained by an employer for it's employees that meets the specific requirements and regulations of Section 125 of the Internal Revenue Code. It provides participants an opportunity to receive certain benefits on a pretax basis. Participants in a Cafeteria Plan must be permitted to choose among at least one taxable benefit (such as cash) and one qualified benefit.

A qualified benefit is a benefit that does not defer compensation and is excludable from an employee’s gross income under a specific provision of the Code, without being subject to the principles of constructive receipt.

The written plan must specifically describe all benefits and establish rules for eligibility and elections.

A Section 125 plan is the only means by which an employer can offer employees a choice between taxable and nontaxable benefits without the choice causing the benefits to become taxable. A plan offering only a choice between taxable benefits is not a Section 125 plan.

PREMIUM ONLY PLAN

A POP provides a cost-effective alternative to satisfy an employer’s obligation. Premium Only Plans can be a great solution for some employers, especially employers who do not want to offer a full Flexible Spending Account Plan but still want to offer tax benefits for their eligible employees.

Why offer a POP? A POP provides a cost-effective alternative to satisfy an employer’s legal obligation when offering a pre-tax option for employer-sponsored benefits such as group insurance, or a Health Savings Account (HSA). However, it does not provide the same services and benefits as those available through a standard Flexible Spending Account (FSA).

A POP is a 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
  • Group Vision
  • Group Disability
  • Group Term Life Insurance
  • Cancer Insurance

This results in a tax savings for both the employer, by reducing payroll taxes and administrative costs, and employee, thru reduced income taxes and increased take-home pay.

Employer Benefits:

  • Reduces payroll taxes (including Social Security and Medicare): for every dollar of employee contribution into the POP, employers save 7.65% FICA taxes.
  • Saves on the cost of administration: the tax savings gained often covers the entire cost of Plan administration.

Employee Benefits:

  • Reduces income taxes (Federal, State, and FICA): pre-tax payroll deductions result in a lower taxable salary.
  • Increases take-home pay.
Number of POP participants
National average paid employee premiums
Plan year
Pre tax dollars spent per year
30
$300 per month
12 months
$108,000

Employer FICA savings = $8,262 annually

Request a quote today!

or call us today at 877-4kazdon

Request Information