Premium Only Plan
(POP) (Section 125)
Premium only plans are made possible by Internal Revenue Code Section 125. The United States Congress created Code Section 125 to make benefits more affordable for participants. Cafeteria Plans, as Section 125 plans are commonly referred to, have become one of the fastest growing fringe benefits offered. Cafeteria Plans provide several tax benefits to both the employer and employee. Participants may choose qualified insurance coverage’s and pay the premiums with pretax dollars. These dollars are subtracted from the gross earnings before taxes are taken out. Thus, when you pay qualified insurance premiums before taxes, you lower your taxable income.