How
POP Plans Work: An Example
Let's look at an example in which an employee making $3,000 per month pays medical insurance premiums in the amount of $500 per month.
Let's look at an example in which an employee making $3,000 per month pays medical insurance premiums in the amount of $500 per month.
|
Without
Cafeteria |
With
Cafeteria |
|
| Gross
Monthly Pay Pre-Tax Deductions |
$
3,000.00
|
$
3,000.00
|
| Insurance Premiums |
0
|
-$500
|
|
|
|
|
| Taxable Income |
$3000.00
|
$2,500.00
|
| Federal Withholding Tax* |
457.00
|
317.00
|
| FICA Tax (Social Security + Medicare) |
-229.50
|
191.25
|
| After-Tax Payments | ||
| Insurance Premiums |
-500
|
0
|
|
|
|
|
| Spendable Income |
$1,813.50
|
$1,991.75
|
Tax-Savings to Company: $38.25 per Month ($459.00 per Year)
(*Based on W-4 Withholding Allowance Status: S-0. Source: 2003 Circular E published by the IRS)
