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Section 125 Premium Only Plan

Section 125 Premium Only Plan 2025

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The document outlines the implementation and administration of a Section 125 Premium Only Plan by United American Insurance Company. It details the benefits of the plan, including tax savings for both employers and employees, and provides a comprehensive guide for employers on how to adopt and manage the plan. Key components include eligibility criteria, required documentation, compliance with legal standards, and instructions for payroll deductions. The document also includes sample letters for employee communication, FAQs about the plan, and guidelines for maintaining compliance with nondiscrimination rules under IRS regulations.

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How much does a Section 125 plan cost?

How A Section 125 Premium-Only Plan Saves Money DescriptionWithout Sec. 125With Sec. 125 FICA @ 7.65% x $12,000 $ 918/yr. Workers Comp. Savings @ 2% x $12,000 $240/yr. Total Employer Savings $1,158/yr. Approximate One-Time Cost to Set Up Plan: ($ 395)19 more rows

What is an ADP premium only plan?

Premium Only Plans benefit both you and your employees Reduce your payroll tax costs (Social Security, Medicare and other payroll tax expenses). Offsets the rising cost of benefit premiums with your payroll tax savings. Decreases your health insurance contributions with little to no effect on employee costs.

What is the ADP Section 125 premium only plan?

A Section 125 Premium Only Plan (POP) allows employees to pre-tax insurance premium such as group health and dental, vision, accident, term life insurance, disability, etc. Employees save up to 40% in payroll taxes and the employer save 7.65% in matching FICA taxes.

What is a Section 125 premium only plan?

Premium Only Plan Pros and Cons Like FSAs, however, unused POP funds are forfeited at the plan years end, and employers often face fees for establishing and maintaining a POP. Moreover, some plans may necessitate hiring benefit specialists to guarantee compliance and avoid penalties.

How are premiums on a Section 125 plan paid?

For benefits like health insurance premiums, the amount is automatically deducted from an employees paycheck on a pre-tax basis. For other benefits, such as out-of-pocket medical expenses covered by an FSA, employees pay the provider first and are then eligible for reimbursement from their account funds.

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