Premium Only Plan

Both the employee and the employer benefit from a Premium Only Plan (POP). The employer has reduced payroll taxes because the employee's contribution is not considered part of taxable income. Employees receive a reduction in taxable income, thus decreasing taxes paid.

* Note: The IRS requires a formal Plan Document for all Section 125 Cafeteria PlansĀ 

Nondiscrimination Testing

If you have adopted a Premium Only Plan:

  • You are required by law to perform an Annual Nondiscrimination Test on your POP (as well as throughout the Plan Year if there are changes in enrollment).
  • POP's cannot discriminate in favor of Highly Compensated and/or Key Employees.
  • You must know which employees are Highly Compensated and/or Key Employees for purposes of the POP's Eligibility Test and the Contributions and Benefits Test.

Your plan could be ineligible if the Nondiscrimination Test is performed improperly! Benefit Advantage will perform your annual Nondiscrimination Test for a fee.

The Premium Only Plan Kit Includes

  • The "How To" Administrative Guide
  • Adoption Agreement
  • Announcement Letter
  • Benefit Election Form
  • Benefit Election Change Request Form
  • Cafeteria Plan Implementation
  • Change of Status Matrix
  • Plan Document
  • Plan Information Summary

* Note: If the employer is a Sub. Chapter S corporation, any 2% or greater owners of the corporation (or their dependent(s)) are not eligible to participate in any form of the Section 125 Cafeteria Plan.