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POPs Enhance Health Plans & Reduce Taxes

In addition to HSAs, HRAs, and FSAs, Sterling also offers Section 125 Premium Only Plans, often referred to as POP Plans. POPs reduce income tax liabilities for employers and employees. This is because IRS Section 125 allows employees to pay their portion of medical insurance premiums and health savings account (HSA) contributions using pretax or tax-free dollars. Sterling HSA provides employers with everything they need to establish a Section 125 POP Plan.

Section 125 IRS Code allows employees to convert a taxable cash benefit (salary) into non-taxable benefits. Under a Section 125 program, employers may choose to pay for qualified benefit premiums before any taxes are deducted from employee paychecks. This is a great way to cost effectively enhance benefits packages.

Sterling offers two types of POPs - Basic and Comprehensive. The Basic plan does not include nondiscrimination testing. With the Comprehensive plan, Sterling will conduct annual nondiscrimination testing for an additional fee.

Employers realize savings by offering a POP to employees. About 10% tax savings is a good estimate as a result of lower Social Security, Medicare, Federal and state unemployment, and worker's compensation taxes, depending on the state. The savings adds dollars to the employer's bottom line.

Employees can often realize 30% - 40% in tax savings because contributions to a POP are exempt from payroll taxes. The actual tax savings are on city, state, and federal income taxes, including Social Security and Medicare taxes on all money employees use to pay for their portion of insurance premiums. Under a Section 125 POP, employees take-home pay is increased which helps reduce the high cost of providing health coverage for family members. Of course actual savings will vary depending upon the employee's tax situation.

If you already have a POP Plan that you started years ago, you can amend and restate the plan anytime. We simply need the original start date of your old plan so we can maintain the continuity back to the original start date. If your document was written before 2002, you must update it right away due to the many changes in IRS Code since then.

For more information, go to Products and Services, POPs. For information on Health Savings Accounts, Flexible Benefit Plans, and Health Reimbursement Arrangements, also see our Products and Services section.

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