Section 105 Medical Reimbursement Plans are the perfect type of insurance for small businesses. HRAs, in particular, let you give your employees a helping hand and keep more money on top!
You probably won’t find Section 105 medical reimbursement plans in your typical employer-sponsored group health insurance plan. But if you’re looking for a dynamic, cost-effective, and sustainable employee benefit option that’s popular with employers today? They might be just the thing!
The self-insurance model was a popular alternative to traditional group health insurance for employers in the 1980s when costs skyrocket. Still, it’s been making waves again as healthcare has become more expensive than ever before.
IRC Section 105 is a federal law that applies to all employer-sponsored health insurance plans. This article provides an easy-to-read overview of what IRC Section 105 means and how it might affect you as the plan participant or beneficiary.
Definition: IRC Section 105 definition
IRC Section 105 is a section of the IRS tax code that takes care of people who have received accident and health insurance. IRC Section 105 allows qualified distributions from these types of plans to be excluded from income (“tax-free”). For example, section 213(d) helps with the cost when you need medical attention while traveling outside your home country. IRC Code 115 states what happens if an employee’s employment ends or they retire – it could happen due to disability in addition!
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- Consumer Directed Health Plans (CDHPs)
- IRS HSA Contribution Limits 2021
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How do people use Section 105 plans?
Self-funded (self-insured) health plans:
A self-funded (or self-insured) health plan is one of the common types. The employer can fund or insure their own healthcare benefits, and it’s a lot less expensive than paying premiums to an insurance company.
Section 105 medical reimbursement plans:
Section 105 medical reimbursement plans offer several benefits to employers. They can either be reimbursed for medical expenses or aid workers with travel necessities. With a Section 105 plan, you can either:
- Implementing a Section 105 medical reimbursement plan alongside your conventional group health insurance plan provides reimbursement for deductible amounts not covered by the insurer. This conjunction is also called “group coverage HRA,” linked HRAs, or simply deductibles.
- Notice a section 105 plan is a stand-alone medical reimbursement plan, which reimburses employees for individual health insurance premiums. These plans are currently compliant and include:
- The one-person stand-alone HRA works much like the QSEHRA. However, an employer can offer it to only one employee. It also has fewer guidelines on items like annual contribution limits.
- Small-business owners can get tax advantages by adopting one of three types of Section 105 medical reimbursement plans. The qualified small employer HRA (QSEHRA) is the most flexible option for employees who want to buy their own health care policies and have reimbursement limits that range from $10,000 a year to $20,000 per month.
- The retiree HRA: This HRA only applies to retirees and is not available to employees. Retirees have the benefit of having more flexibility than other HRAs and don’t face as many restrictions.
Other Section 105 plans
- Health Reimbursement Arrangement
- Health Reimbursement Account
- Medical Expense Reimbursement Plan
- Healthcare Reimbursement Plan
- Medical Reimbursement Plan
- Section 105 Plan
- Health Reimbursement Arrangement – HRA
- Section 105 Plan Document – https://www.irs.gov/pub/irs-drop/rr-05-24.pdf
- QSEHRA – www.healthcare.gov/glossary/qsehra/
- Section 213 – www.law.cornell.edu/uscode/text/26/213
So, now you know what Section 105 medical reimbursement plans are and how they work. It’s time to start planning out your own! If you’re still not sure where to start or need a little help getting started with the process of creating one for yourself, don’t worry – we’ve got your back. Just comment below.