A Premium Only Plan (POP) is an employee benefits program designed to take advantage of Section 125 of the Internal Revenue Code. It allows employees to pay certain qualified expenses (such as health insurance premiums) on a pre-tax basis, thereby reducing their total taxable income and increasing their spendable/take-home income.
Employers may deduct the employee’s portion of the company-sponsored insurance premium directly from the said employee’s paycheck before taxes are deducted. A POP must be setup according to IRS guidelines in order for the company to withdraw premiums for medical, dental, or vision insurance pre-tax.