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REDUCE YOUR TAX BURDEN!

  TAKE ADVANTAGE OF IRC SECTION 125 CAFETERIA PLANS

 

What is P.O.P.?

P.O.P (Premium Only Plan) is a way to enhance your current employee benefit program with little or no cost to your organization. With labor markets continuing to tighten, the quality of your benefits program can be the difference in attracting and retaining quality employees or losing them to your competitors. By implementing a Section 125 Cafeteria Plan you can improve employee morale, reduce employee turnover and save your organization money.    P.O.P. is an exciting concept in employee benefit programs. The types of pre-taxable benefit plans that can be included in your P.O.P plan are:

 Health Insurance (medical/dental/vision)

 Disability Income (short-term and long-term)

 Supplemental Benefits (group rates & portable)

P.O.P. can be established for any single employer or certain ”related employers,” including members of a controlled group of corporations, members of a group of commonly controlled trades or business, or member of an affiliated service group.  Certain individuals however are prohibited from participation in a P.O.P plan.  These include sole proprietors, partners within a partnership, or owners of a Sub-chapter S corporation.

P.O.P. Can Reduce Employer taxes and Enhance Employee Benefits

IRC Section 125 considers P.O.P. pre-tax premium contribution dollars as employer dollars for tax purposes. As a result, your company’s total taxable payroll is reduced by the amount of the employee contributions.  A reduced payroll results in lower payroll taxes!  The amount of savings depends on total company payroll and how much employees contribute toward their benefits, but any size company can implement your own P.O.P. and save money!

In this sample illustration during the next twelve months your company could enjoy a tax savings of over $2,619.70. 

 

 

 

Employee Paid Medical Premiums Only

Employee Paid Medical & Voluntary Premiums

Social Security

6.2%

6.2%

Medicare

1.45%

1.45%

FUTA

0.8%

0.8%

California UI

3.5%

3.5%

Worker’s Compensation (Estimated)

3.46%

3.46%

Company Total Payroll Tax

15.41%

15.41%

Current Health Premium (Annual)

$12,000.00

$12,000.00

Estimated Voluntary Premium (Annual)

$------------- 

$5,000.00

Total Yearly Subject Premium

$12,000.00

$17,000.00

Tax x Premium = Company Savings

$1,849.20

$2,619.70

 

 

The same kinds of savings are available to every employee in your company who makes a contribution toward their insurance benefits.  Employees reduce taxable income by the amount of the contribution; they pay less income and SS tax and actually increase the take home pay! (Note: There are no tax savings on medical premiums if the employer pays 100% of the employee’s medical premium).

In this sample illustration during the next twelve months your EMPLOYEES could enjoy a tax savings of $5,618.50 or more depending on their benefit choices.  The bottom line is, we can save you and your employees money and improve employee recruitment, retention and morale with a Section 125 Cafeteria Plan.

 

 

EMPLOYEE GROUP SAVINGS EXAMPLE

 

Employee Paid Medical Premiums Only

Employee Paid Medical & Voluntary Premiums

Social Security

6.2%

6.2%

Medicare

1.45%

1.45%

Federal

15.0%

15.0%

State

9.4%

9.4%

SDI

1.00%

1.00%

Employee Estimated Payroll Tax

33.05%

33.05%

Current Health Premium (Annual)

$12,000.00

$12,000.00

Estimated Voluntary Premium (Annual)

$------------- 

$5,000.00

Total Yearly Subject Premium

$12,000.00

$17,000.00

Tax x Premium = Employee Savings

$3,966.00

$5,618.50

 

 

Section 125 Compliance Review

If your company already has a Section 125 Plan we may still be able to assist you with our no charge Section 125 Compliance Review.  It has been our experience that approximately 75% of the plans we review are out of compliance.
 

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