How Premium-Only Plan Affects The Employers

Section 125 premium-only plans (POP) are a tax-free strategy designed to reduce the cost of healthcare for employers and employees. As POP effectiveness has steadily led to the success of sponsored healthcare plans nationwide, their popularity among business owners has grown. With the national eye zeroing in on sponsored health care as a national issue, State and Federal reforms have propagated the use of premium-only plans through legislative promotions and requirements.

Legislation enacted this requirement with the hope that POP plans would increase the accessibility of sponsored health insurance for employees state-wide. You can also look for premium-only plan compliance assistance providers that offer entirely online-based services and provide automatic updates.

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Businesses are not distinguished by the number of individuals they employ and are required to maintain compliance to a POP if they provide any payroll deductions for their employees. The legislation also requires that business owners subscribing to a premium-only plan perform annual nondiscrimination testing; this ensures that high wage earners and "key employees" do not acquire a disproportionate or unfair percentage of the POP plan tax savings.

The Section 125 premium-only plan is a form that allows businesses of all sizes and disciplines to apply tax-free dollars to their sponsored health insurance. When an employer subscribes to a POP they can deduct their employee premium contributions before regular State and Federal taxes are deducted. 

Any employer seeking to provide their employee’s payroll deductions must subscribe to a premium-only plan first. Anytime company information changes, the premium-only plan documentation needs to be updated and annual nondiscrimination must be performed. It is strongly recommended that employers subscribing to a POP use a premium-only plan service provider, as the penalties for falling out of compliance are fairly steep.