PREMIUM ONLY PLAN

A Premium Only Plan (POP) is a plan that allows premiums for group insurance to be deducted from an employee’s paycheck on a pre-tax basis, saving both the employer and employee FICA taxes of 7.65% of the contributions.  The employer may have a reduced unemployment tax liability.  Employer contributions are treated as a business expense.  The employee reduces his or her federal income tax liability and in most cases state income tax liability.  The types of insurance that are allowed in a POP include:   

• Accident

• Cancer

• Dental

• Disability (not recommended since benefits are taxed if premiums paid with pre-tax dollars)

• Group term life for non-dependent (up to $50,000)

• Group health

• HMO

• Vision