Section 125 Premium Only Plans


Sometimes referred to as "POP", these plans reduce income tax liabilities for both the employer and employee. IRS Section 125 allows employees to make special salary deduction elections to pay their portion of medical insurance premiums using pretax or tax-free dollars. That means that the employee saves FICA, federal and state taxes and the employer saves on FICA, FUTA and SUTA. We provide employers with everything they need to establish a Section 125 POP Plan

Benefits from using a Section 125 - Premium Only Plan

Employees save 22.65% to 40% of their pre-tax Section 125 premium deductions in just federal income taxes alone. The actual tax savings are on local state, and federal income taxes, including Social Security and Medicare taxes based on employees’ deductions for insurance premiums. Under this plan, employees take-home pay is increased, which helps reduce the high cost of health coverage.

Savings to Employees

Based on an employee contributing $1,000 per month to their various insurances, and approximately a 30% tax rate (FICA 7.65% + Federal 20% + State 2-3%). $1,000 x 12 months = $12,000 per year in insurance contributions that can be taken as a pre-tax deduction. The resulting reduction in employees’ taxes of approximately $3,600 per year effectively increases their net pays.

How EMPLOYERS Benefit from a Section 125 Premium Only Plan.

Employers benefit by reducing the matching Social Security and Medicare taxes, and sometimes Federal and State unemployment taxes.

Savings to Employers

$12,000 (employee pre-tax deduction as detailed above) x 7.65% (employer FICA) = $918 in annual TAX SAVINGS per employee to you, the employer.


Frequently Asked Questions

  • How it is Administered

  • Who Can Participate

  • When Should I Start

  • What if I Already have a Plan

You are here: Home 125-Plan