Put the Tax Code to Work for You

If your employees pay a portion of their group insurance premiums, you may be able to reduce your payroll taxes, and give workers a little extra in their checks each and every payroll, by letting us handle payroll deductions for insurance premiums with a premium only plan (POP).

POP allows employees to make contributions to their group health, dental, and term life insurance before taxes are calculated. Under section 125 of the Internal Revenue Code, employees save FICA and federal income tax on their insurance deductions with every paycheck. Also, in most states, employees can save the state income tax on these deductions.

You can save too, because eligible businesses do not pay FICA matches or FUTA tax on employee medical deductions. For many small- to midsize companies, the savings can be substantial.

Cut Through the Red Tape

POP paperwork is time-consuming. IRS plan requirements are stringent and very complicated.

Fortunately, Advantage can make it easy for you and your employees to get everything that's coming to you. Our complete and affordable POP services include:

  • Sample plan document
  • Employee enrollment forms
  • Enrollment and annual re-enrollment administration
  • Nondiscrimination testing

How Much Could You Save?

Here's how much an employee with gross income of $2,500 each month could save with a POP.

After-Tax Deductions

Gross Wages$2,500.00

Taxable Wages$2,500.00

FICA$191.25

Fed. Tax (20%)$500.00

State Tax (10%)$250.00

Insurance$200.00

Net Pay$1,358.75

Pre-Tax Deductions

Gross Wages$2,500.00

Insurance$200.00

Taxable Wages$2,500.00

FICA$175.00

Fed. Tax (20%)$460.00

State Tax (10%)$230.00

Net Pay$,434.05

Monthly Savings $75.30

($1,434.05–$1,358.75)

Annual Savings$930.60.

($75.30 x 12)

Here's how much you could save on this employee if your business had a POP.

After-Tax Deductions

FICA Match $191.25

Pretax Deductions

FICA Match 175.95

Monthly Savings $15.30

($191.25–$175.95)

Annual Savings $183.60

($15.30 x 12)

A business with 10 employees participating in the above scenario would realize savings of at least $1,836.00 (10 x $183.60) in FICA match alone.

Contributions to a POP plan are also exempt from FUTA and, in many states, SUTA.

For more information about section 125 and premium only plans, contact an Advantage representative at an office location near you. Or, have us contact you.

Contact Us for More Information
Monday - Friday | 8 a.m. - 8 p.m.
OR