Premium Only Plans

A Premium Only Plan, or POP, allows employees to make contributions to their group, dental, life and disability insurance cost before taxes are calculated. Under Section 125 of the Internal Revenue Code, employees save FICA, federal income tax, and in most cases, state income tax on their health insurance deductions with every paycheck.

You can save, too, because eligible businesses do not pay FICA matches or FUTA tax on employee medical deductions. In about half of the states, these contributions may be exempt from SUTA. For many small to medium-sized companies, the savings can be impressive.

This plan includes the following services:

  • Sample Plan Document
  • Employee enrollment forms
  • Enrollment and annual re-enrollment administration
  • Non-discrimination and other federal eligibility testing
  • IRS Form 5500 filing when required
  • Annual Summary report documentation

Potential Employee Savings Example:
Here’s how much an employee grossing $450 each week could save with a Premium Only Plan.


After Tax Deductions Pre-Tax Deductions Difference
Gross Wages $450.00 $450.00
Taxable Wages $450.00 $400.00
FICA $34.43 $30.60
Federal Tax 15% $67.50 $60.00
State Tax 2% $9.00 $8.00
Medical Insurance $50.00 $50.00
Net Pay $289.07 $301.40 $12.33 week
($641.16 yr.)


Potential Employer Savings:
Here’s how much you could save on this employee if your business had a Premium Only Plan.


After Tax
FICA Match $34.43 $30.60 $3.83 week
($199.16 yr.)


A small business with 10 employees participating in the above scenario would realize saving of at least $1,991.60 (10 x $199.16) in FICA match alone. Contributions to a Premium Only Plan are also exempt from FUTA and in many states SUTA.