A Section 125 Premium Only Plan (POP) is one of the most effective and often overlooked ways employers can enhance their employee benefits program while reducing payroll taxes for both the employer and employees. Many employers in Pennsylvania, New Jersey, Delaware, and across the country use POP plans to give employees a more robust benefits offering, increase take-home pay, and reduce overall tax liability.
With a Premium Only Plan, employees can pay for certain insurance premiums using pre-tax dollars. This typically results in employees saving approximately 20–40% on their benefit deductions, while employers can reduce payroll taxes by around 7.65% on those same deductions. These tax savings can be significant for both employers and employees, making POP plans a simple but powerful benefits strategy.
What Benefits Can Be Included in a Section 125 POP Plan?
As long as the POP plan is structured to be ACA compliant and integrated with a qualified group health insurance plan, many employee benefits can be paid for on a pre-tax basis, including:
- Medical insurance premiums
- Prescription drug coverage
- Dental insurance
- Vision insurance
- Disability insurance
- Group term life insurance
- Cancer insurance
- Medicare supplement plans
- Hospital indemnity plans
- Accident insurance
By allowing employees to pay for these benefits with pre-tax dollars, a Section 125 plan helps reduce taxable income, which increases net take-home pay and makes benefits more affordable.
How POP Plans Help Employers with Employee Retention
As healthcare costs, insurance premiums, and out-of-pocket expenses continue to rise in 2026, employers are looking for ways to offer better benefits without significantly increasing costs. A Section 125 Premium Only Plan helps employers enhance their benefits package while also improving employee satisfaction and retention.
Employees who have access to better benefits and lower out-of-pocket costs are often more satisfied and financially secure. This can lead to higher productivity, lower turnover, and improved employee retention. Considering the high cost of recruiting and training new employees, offering tax-advantaged benefits through a POP plan can provide employers with a significant competitive advantage.
A Simple Way to Improve Benefits and Reduce Taxes
Section 125 POP plans are not complicated to implement, but they can provide substantial tax savings and financial benefits for both employers and employees. In many cases, the tax savings alone can offset the cost of administering the plan.
For employers looking to improve their employee benefits program, reduce payroll taxes, and help employees increase their take-home pay, a Section 125 Premium Only Plan is a smart strategy to consider.
Request a Consultation
If you are interested in implementing a Section 125 Premium Only Plan, improving your employee benefits program, or reducing payroll taxes, JS Benefits Group can help.
We work with employers throughout Pennsylvania, New Jersey, Delaware, Maryland, and across the Mid-Atlantic region to design cost-effective employee benefits programs and compliance strategies.
Request a Consultation to speak with an employee benefits consultant and learn how a POP plan could benefit your organization. www.jsbenefitsgroup.com
