The Premium Only Plan – POP plan – Cutting Costs made Easier

Premium Only Plans is an excellent solution for saving pre-tax dollars on group insurance premiums for many employers and employees. They are ideal for businesses that want to provide some kind of tax benefits for eligible employees without offering a comprehensive Flexible Spending Account Plan (FSA) or an Health Savings Account (HSA). A POP is a cost-effective alternative plan that an employer/employee can take advantage of. For employers, who do not want to offer a full Flexible Spending Account (FSA) Plan, but still want to offer a tax benefits for their eligible employees, premium only plans – POP plan is the perfect solution!

In addition to the tax benefits to employees who will have less taxable gross income under a POP, employers also benefit by saving payroll taxes on the employee salary reductions.

Here are three things you should know about these plans:

1. Cash-out provision:

POPs can include a cash-out provision for employees electing not to receive coverage under the plan. For example, an employer might decide to pay 80 percent of the premium for employee only coverage and allow employees the choice to either pay the remainder for the medical coverage or receive a fixed amount in cash if the employees choose not to elect the medical coverage.

2. Requirements:

While the cafeteria plan has the tax advantages discussed above, the plan is still subject to the legal requirements in Section 125 of the Internal Revenue Code, including plan documentation.

In addition, a POP is subject to nondiscrimination testing requirements, although a safe harbor applies to POPs that allow them to automatically satisfy several component parts under standard discrimination testing.

However, adding any other component–including a health flexible spending account (FSA) or dependent care account–will cause the plan to no longer qualify as a POP and enjoy the safe harbor for nondiscrimination testing.

3. ERISA implications:

A POP is not itself an ERISA plan, but the health and welfare benefits being paid for through the POP are covered by ERISA. So, ERISA reporting and disclosure requirements will apply to any ERISA covered benefit (ex. group medical, dental, STD, LTD, etc.) offered through a POP.

Those ERISA requirements include summary plan descriptions (SPDs) disclosures to participants, written plan documentation and, for certain plans, Form 5500 filings.


Coverage offered by Premium only plan pop may include the following:
• Group Medical
• Group Dental
• Group Vision
• Group Disability
• Group Term Life Insurance

The result is a decent tax saving for employers and employees, both!

Top 7 Reasons you should opt for premium only plans pop:

1. Lower employer taxes
2. Lower administrative costs
3. Easy to set-up via the payroll system
4. Happier employees
5. Lower employee taxes
6. Lower insurance costs
7. Better health coverage

Did you know? ACA Compliance Solution Services, Inc. is the leading name in providing an excellent solution for regulatory compliance requirements, with a team of highly experienced professionals they are known to provide exceptional assistance to employers in saving on group insurance plans with pre-tax dollars as well as ensuring employees do not compromise on any health benefits coverage. Feel free to contact us at 877.959.3953or our website and we will be glad to assist you!

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