With the rising costs of health care and the down economy. more and more small businesses and companies are having a tough time providing the same health benefits as before. But there's actually an easy solution that can help employers like you offer employees their much-need benefits and make them happy without taking on extra cost This is where you could use a Section 125 POP Plan.
What is a POP Section 125?
A POP plan is the most basic type of Section 125 plans or cafeteria plans. ?POP? means ?premium-only plan.? When you offer a Section125 POP plan, you are allowing your employees to choose to participate in benefits, such as health, life or dental insurance, and purchase these benefits on a tax-advantaged basis.
How Does It Help With the Cost?
A Section 125 POP plan deducts benefit premiums from employee paychecks on a pre-tax basis. This means that the employee?s taxable income is reduced. As a result, their FICA and Medicare taxes are reduced. In the end, the cost of the health benefits turn out to be much more affordable when ran under a POP 125 than if employees had purchased it on their own post-tax. Having to pay for their benefits or at least putting in their share of the expense won't have to be such burden to employees because the tax savings has already offset a big chunk of the cost.
You can also offer voluntary benefits without actually having to pay for them and still save in the employer tax savings which helps even more. This is important as health insurance gets more expensive, forcing you to shift more and more health care costs to your staff. Health care costs of the future will be much more a shared responsibility and the tax savings on the part of the employee is the same as a raise, only through your Section 125 it comes from Uncle Sam.
The savings to the employer changes depending on your state or the state the employees are located in however because the employee?s taxable income is lowered, you will always gain from eliminating those wages from employee and employer matching FICA and Medicare, and Federal Unemployment taxes. You can also get to see some savings from state and local payroll taxes, as well as for workers' compensation. This cost savings can be huge.
But Won't the Process Be Too Much Trouble?
It won't be if you elicit professional help from a POP plan advisor. If you get a team of tax professionals who know exactly what requirements should be accomplished, set-up, implementation, and subsequent maintenance of your Section 125 plan can be so easy. And it the cost is nowhere near as high as you would expect it to be.
What is a POP Section 125?
A POP plan is the most basic type of Section 125 plans or cafeteria plans. ?POP? means ?premium-only plan.? When you offer a Section125 POP plan, you are allowing your employees to choose to participate in benefits, such as health, life or dental insurance, and purchase these benefits on a tax-advantaged basis.
How Does It Help With the Cost?
A Section 125 POP plan deducts benefit premiums from employee paychecks on a pre-tax basis. This means that the employee?s taxable income is reduced. As a result, their FICA and Medicare taxes are reduced. In the end, the cost of the health benefits turn out to be much more affordable when ran under a POP 125 than if employees had purchased it on their own post-tax. Having to pay for their benefits or at least putting in their share of the expense won't have to be such burden to employees because the tax savings has already offset a big chunk of the cost.
You can also offer voluntary benefits without actually having to pay for them and still save in the employer tax savings which helps even more. This is important as health insurance gets more expensive, forcing you to shift more and more health care costs to your staff. Health care costs of the future will be much more a shared responsibility and the tax savings on the part of the employee is the same as a raise, only through your Section 125 it comes from Uncle Sam.
The savings to the employer changes depending on your state or the state the employees are located in however because the employee?s taxable income is lowered, you will always gain from eliminating those wages from employee and employer matching FICA and Medicare, and Federal Unemployment taxes. You can also get to see some savings from state and local payroll taxes, as well as for workers' compensation. This cost savings can be huge.
But Won't the Process Be Too Much Trouble?
It won't be if you elicit professional help from a POP plan advisor. If you get a team of tax professionals who know exactly what requirements should be accomplished, set-up, implementation, and subsequent maintenance of your Section 125 plan can be so easy. And it the cost is nowhere near as high as you would expect it to be.
About the Author:
Take full advantage of the tax savings that a Section 125 POP plan offers! Give us a visit and find a secure and cost-effective way of having your POP Plan documents ready and updated all the time.