What Is a Premium-Only Plan (POP) — and Why It's Not Enough

A Premium-Only Plan (POP) is the simplest Section 125 cafeteria plan structure. It handles one specific function: it lets employees pay their share of group health insurance premiums with pre-tax dollars. About 30% of small businesses run a POP. It's a real, useful structure that captures the FICA savings on the premium portion (~$200-$400/employee/year). But it's a fraction of the available Section 125 savings — it misses the Preventive Care wellness layer that delivers the structural employee paycheck raise + full $681.60/employee/year employer FICA savings + 30-60% Workers' Comp reduction.

What a POP captures: employees pay pre-tax for group health insurance premiums (typically saving the employee ~$300-$500/year in income tax + employee FICA on their portion of the premium). Employer captures the matching ~7.65% FICA savings on the same dollars. Setup is minimal — most benefits brokers can administer a POP. What a POP misses: the structural pre-tax salary reduction layer ($14,400/year per employee), the post-tax wellness reward ($1,000/month per employee), the wellness benefits package (telemedicine, free generics, dental, mental health), and the meaningful Workers' Comp base reduction. For a 50-employee POP operator, upgrading to Preventive Care adds approximately $34,080/year in additional FICA savings + WC reduction.

How the math works (in 90 seconds)

For every enrolled W-2 employee earning $25,000+/year and covered under an ACA-compliant group health plan:

• Pre-tax salary reduction: $1,200/month · $14,400/year
• Employer FICA savings (7.65%): $1,101.60/year
• Less program admin fee ($35/mo): −$420/year
• Net employer savings: $681.60/employee/year
• Employee net take-home raise: +$71.96/paycheck (~$863/year)
• Workers' Comp reduction: 30–60% real-world at next audit cycle

A 50-employee company nets $34,080/year in net FICA + industry-specific WC reduction. Run the calculator → for your specific number.

Verified compliant — May 2025 + August 2025

The Section 125 Preventive Care program described above was independently reviewed in 2025 by:

• HitesmanLaw P.A. (May 5, 2025) — 8-page formal legal opinion from Darcy L. Hitesman, J.D., a Super Lawyer-rated ERISA attorney with 35+ years in IRC § 125 practice, AV-rated since 1998, co-author of the national ERISA compliance manual. Concludes the program "satisfies applicable IRS requirements."
• CBIZ Advisors LLC (August 22, 2025) — top-7 U.S. accounting firm, 135,000+ clients. Independent review confirms compliance with IRC §§ 125, 105, 106, ERISA, ACA, and COBRA when operated per its provisions.
• $500,000 insurance-backed legal protection per enrolled employer + $10,000 per employee participant.

Read the full compliance authority page → · IRS.gov — Cafeteria Plans (Section 125) · 26 U.S. Code § 125

A real result from a real company

Avant-garde / Houston restaurant group — 132 W-2 employees, 69 locations, three law firms reviewed before signing — saves $250,000+/year through this exact program structure. Read the full case study →

This isn't a projection — it's reported, on the public record, from operators whose own CPAs and attorneys reviewed the documentation before signing. Browse the full case study set →

How to verify it yourself

Three primary sources, all public:

1. IRS.gov — Cafeteria Plans — the law in the IRS's own words.
2. 26 U.S. Code § 125 — the federal statute itself.
3. The Hitesman opinion + CBIZ review — both share-able PDFs, available on your free 15-minute analysis call.

Content reviewed by Virginia Fish, CPA — tax and employer benefits specialist with 10+ years in financial reporting and payroll tax strategy.