Your Employee’s (and dependent’s) contribution – deduction, the portion they are paying for your companies group medical premiums can be tax deductible with a Premium Only Plan – (POP) which is allowed under Internal Revenue Code (IRC) §125 (pdf).
The way it works, is that your company signs up for a POP plan, with an authorized administrator – vendor, often the same Insurance Company that your medical coverage is through, but it doesn’t have to be. The cost of the plan is in the neighborhood of $135/year. The administrator sends you a kit and you distribute the forms and have each employee enroll. The forms do not have to be filed with the government or even the administrator. You just keep them on file in your company records.
The premiums you as the employer is paying for Medical Coverage are already tax deductible for the business and not is reportable as income to the employees under Internal Revenue Code §106. The POP plan, allows the portion of the premium that the employee is paying to also be tax deductible.
Here’s how it works. Brochures and video are in the right hand column.
Lower taxable income on the employee’s 1040
PLUS, the POP will lower the employER’s payroll taxes such as FICA FUTA, Medicare Tax, Income Tax Withholding US Code 26 C 21, Publication 535Publication 15-A State Disability Insurance (SDI) and possibly Worker’s Comp. About.com
To start your companies POP Plan, just review the brochures, complete the application and return to us. The administrative process and fees (around $150/year) are nominal. It’s a WIN/WIN for both employER, employee and the dependents.
HCR (Health Care Reform) IRC §125 (f) (3) narrows the definition of qualified benefit to exclude Individual Coverage offered through the Exchange – Covered CA. Notice 2013-54 cuts off employer reimbursement outside of exchange too.
Pay Check City – Video Instructions @ 2.16 minutes
- §125 Cafeteria Plan – Full Benefit
- Links & Resources
- Section 125 POP FAQ’s
- Full Tax Deduction IRC §106
- Section 125
- Self Employed