A Section 125 Premium-Only-Plan (POP), is a cafeteria plan which allows employees to pay their health insurance premiums with tax-free dollars.  Traditionally, these POP plans have been used in combination with employer-sponsored group health insurance plans. However, beginning January 1st, 2009, employees can now use POP plans to pay individual health insurance premiums with tax-free dollars.

Using Section 125 POP to pay for insurance premiums benefits both employers and their employees.

Employees save up to 40% on federal income taxes alone. Under a POP plan, an employee's take-home pay is increased, effectively reducing the cost of purchase adequate health insurance.

How Section 125 Premium-Only-Plans (POP) Benefit Employers:

Employers benefit by reducing their tax liability.  With POP, employers do not have to pay FICA/FUTA taxes (~7.65%) on dollars that employees use toward the cost of their individual (or group) health insurance premiums.

States Pass Laws Requiring Employers to Offer Section 125 Premium-only-Plans (POP) to Employees

Most states are considering passing laws effectively mandating that employer offer Section 125 POP plans to their employees.  The following states have already passed similar legislation.

           SRC: NCSL Website

According to the National Conference of State Legislatures (NCSL), it costs approximately $100 per year per employee to set up and administer a Section 125 POP plan.   Several national companies (including Zane Benefits, Inc.) compete for this business.