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What is a Section 125 POP Plan Document?

Well, in the case of an IRS Audit this document allows you to prove to the IRS that you are in compliance with your plan and have the legal ability to pay your benefit premiums pre-tax, effectively giving you and your employees a raise by keeping profits in your pockets instead of paying payroll and income taxes. As an operating business with a Section 125 POP Plan you are required to have a written plan document on hand.

Sometimes our clients want a document that can explain the specifics of the company benefits package to their employees.  There is both a plan document and an SPD or Summary Plan Description.  Unfortunately, the POP Plan document is written in a legal format, so it might as well take a PhD in Latin and a law degree to make sense of all of it but underneath the hood the employees benefit by saving tax on the premiums that are deducted to purchase their respective insurance benefits.

Our suggestion would be to use a simple payroll % illustration or have your broker or consultant prepare a quick illustration showing the “net” deduction after using IRS Section 125 for deductions.