TPS Group offers customized Premium Only Plans (POP) for small businesses in Connecticut & surrounding states. If you’re a small business looking to save on taxes, a POP could be the perfect fit. Section 125 of the IRS code allows small businesses to make a simple change to the company’s payroll process that reduces employees’ taxable payroll. Every employees’ premium contribution through a premium only plan can be deducted from the overall taxable payroll amount.
What is a Premium Only Plan?
When combined with group health insurance, POPs pay a portion of employees’ insurance premiums on a pre-tax basis, which reduces their taxable income. As a result, a Premium Only Plan reduces the income amount used to determine your payroll taxes as well. A POP offers a win-win situation for employers and employees alike.
Benefits of POPs in CT
The Premium Only Plan is the building block of the Section 125 Plan. It allows for certain employee-paid group insurance premiums to be paid with pre-tax dollars. A few benefits of POPs are:
- Lower Employer Taxes
- Lower Employee Taxes
- More Take-Home Pay
- Happier Employees
- Easy Set-Up
Who can sponsor a Premium Only Plan?
Any employer can sponsor a Premium Only Plan. Regular corporations, partnerships, S corporations, limited liability companies (LLCs), sole proprietors, profession corporations, and not-for-profits can all save money on payroll taxes by establishing a Premium Only Plan. While regulations prohibit a sole proprietor, partner, members of an LLC (in most cases), or individuals owning more than 2% of an S corporation from participating in the POP, they may still sponsor a plan and benefit from the savings on payroll taxes.
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