{"id":378,"date":"2019-05-29T08:12:33","date_gmt":"2019-05-29T08:12:33","guid":{"rendered":"http:\/\/cdhp.sourceitmarketing.com\/wordpress\/?p=378"},"modified":"2019-08-30T20:24:57","modified_gmt":"2019-08-30T20:24:57","slug":"premium-only-plan-pop-safe-harbor-test-for-eligibilit","status":"publish","type":"post","link":"https:\/\/www.flexiblebenefit.com\/cdhp\/premium-only-plan-pop-safe-harbor-test-for-eligibilit\/","title":{"rendered":"Premium Only Plan (POP) Safe Harbor Test for Eligibility"},"content":{"rendered":"

Premium Only Plans<\/a> (POP) can generally be defined as a type of Cafeteria Plan where the only pre-tax benefit available to employees are for those of insurance premiums. Now, whenever non-taxable benefits are involved, the IRS will usually have some strict rules in place that must be followed. <\/p>\n

For Cafeteria Plans, these are referred to as non-discrimination rules, and these rules are in place to ensure the plan doesn\u2019t discriminate in favor of highly compensated and\/or key employees. There are three different non-discrimination tests that must be passed relating to 1) eligibility, 2) actual contributions and benefits, and 3) key employee concentration. These are rather sophisticated and complex tests that need to be performed, and employers usually have to rely upon a third-party to conduct the testing.<\/p>\n

But there is some good news for POP plans!<\/strong> Employers will get an automatic pass of the three non-discrimination tests if they can satisfy one simple requirement. If the ratio of non-highly compensated employees participating in the POP plan compared to the ratio of highly compensated participating in the POP plan is 50% or greater, the employer will be treated as passing all of the non-discrimination tests. 
Okay, maybe that actually sounds complicated, but it\u2019s pretty simple to understand once you\u2019ve seen an example. The following information applies to XYZ Company:<\/p>\n