If you're deducting premiums from employees' paychecks before taxes, having a POP document is crucial for compliance. This document ensures that employees can contribute to their insurance plans – such as health, dental, and life insurance – on a tax-free basis. It's a win-win: employees save on taxes, including FICA and federal income taxes, potentially up to 30%, while employers also benefit by saving on FICA taxes at 7.65%. Without a POP document, making pre-tax deductions could lead to non-compliance and penalties. This process is also referred to as a Section 125 or Cafeteria plan.
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