What is it?
A Premium Only Plan (POP) is an IRS-approved way for you to pay for your share of your employer-sponsored insurance premiums with before-tax dollars. If you are paying premiums for health insurance, dental or vision care, or group-term life insurance (under $50,000), every one of those dollars will not be taxed as long as you’re enrolled in your company’s POP.
How does it benefit me?
- You will have more money in your paycheck because you are not paying taxes on insurance premiums.
- On average, an employee can achieve 25% to 30% in tax savings (Federal income, Social Security, Medicare and possibly State and Local income taxes).
- You can elect to pay insurance premiums on a pre-tax basis for your spouse and any legal dependents.
What else do I need to know?
- Once you have elected to participate, you cannot change your election for the of the plan year, unless you have a change status, like getting married, having a baby, or an employment change.
- Because a POP lowers your contribution to the Social Security system, it’s possible that future Social Security benefits may be slightly reduced.