The POP calculator estimates an employer’s annual FICA savings by multiplying the total annual employee premiums by 7.65%, the current rate for the employer’s share of Medicare and Social Security taxes. Actual savings will be lower for employees with compensation over the Social Security wage base ($117,000 for 2014).
Under IRS rules, if premiums for LTD coverage are paid on a pre-tax basis, then LTD payments made to the employee are taxable. Check with your tax or legal advisor to determine whether LTD premiums should be paid on a pre-tax basis.
Under IRS rules, if premiums for group term life coverage are paid on a pre-tax basis, then the cost of coverage in excess of $50,000 must be imputed in the employee’s taxable income. Check with your tax or legal advisor to determine whether group term life premiums should be paid on a pre-tax basis.
ADP, LLC and its affiliates do not offer investment, financial, tax or legal advice or management services. Nothing in these materials is intended to be, nor construed as, advice or a recommendation for a particular situation. Check with your tax or legal advisor to determine the rules that apply to your situation.
The “With POP” calculation estimates applicable taxes after reducing an employee’s income by the amount of pre-tax premiums. The “Without POP” calculation estimates applicable taxes before reducing an employee’s income by the amount of post-tax premiums.
The POP calculator estimates Federal and State income taxes by applying the applicable Federal and State income tax brackets and rates for a single filer, but does not take into account adjustments to gross income, the standard deduction, the personal exemption or other tax credits. An employee’s actual taxes may be lower.
The POP calculator estimates Social Security tax by applying a 7.65% rate to income up to the Social Security wage base ($117,000 in 2014) and a 1.45% rate to income over the Social Security wage base, but does not take into account the additional Medicare tax of .9% on income over $200,000.
The POP calculator uses Social Security wage base information from the Social Security Administration, Federal income tax bracket and rate information from the Internal Revenue Service, and State income tax bracket and rate information from the Tax Foundation (see http://taxfoundation.org/article/state-individual-income-tax-rates). Note that the Tax Foundation information may be up to a year old. The Social Security wage base, and the Federal and State income tax and rate information will be updated periodically.
The State of New Jersey does not recognize pre-tax contributions to a POP plan, so the NJ State income tax estimate is the same for both the “With POP” and “Without POP” calculations.
The POP calculator assumes that an employer offers one medical plan, one dental plan, etc. If the employer offers multiple medical options (for example, a high-deductible medical plan and a low-deductible medical plan), then estimated taxes will vary based on the employee’s share of premiums for each medical option.
ADP, LLC and its affiliates do not offer investment, financial, tax or legal advice or management services. Nothing in these materials is intended to be, nor construed as, advice or a recommendation for a particular situation. Check with your tax or legal advisor to determine the rules that apply to your situation.
ADP, LLC and its affiliates do not offer investment, financial, tax or legal advice or management services. Nothing in these materials is intended to be, nor construed as, advice or a recommendation for a particular situation. Check with your tax or legal advisor to determine the rules that apply to your situation.