What is a 105h plan?

What is a 105h plan?

Section 105(h) sets forth the nondiscrimination rules that apply to self-insured medical reimbursement plans. These rules only affect whether reimbursements made under the plan are taxable.

What is Section 125 nondiscrimination testing?

What is Section 125 Nondiscrimination Testing? Your plan allows employees to pay for their health care and dependent care expenses on a pre‐tax basis. In order for Highly Compensated and Key employees to receive these benefits, the plan must not discriminate in their favor.

What is a self-insured medical expense reimbursement plan?

A self-insured medical reimbursement plan (SIMRP) is a separate written employer plan, which reimburses employees for medical expenses that are not provided by either an accident and health insurance policy or a prepaid healthcare plan (e.g., an HMO) that is regulated under federal or state law.

What plans are subject to nondiscrimination testing?

The IRS requires non-discrimination testing for employers who offer plans governed by Section 125, which includes a flexible spending account (FSA). And though they aren’t part of Section 125, testing is also required for health reimbursement arrangements (HRAs) and self-insured medical plans (SIMPs).

What is 105h testing?

The eligibility test under Section 105(h) looks at whether a sufficient number of non-HCIs benefit under a self-insured health plan. If not enough non-HCIs are benefitting, the plan will fail this discrimination test.

Can employer reimburse employee for Medicare premiums?

Employers can’t pay employees’ Medicare premiums directly. However, they can designate funds for workers to apply for health insurance coverage and premium payments with a Section 105 plan. Employers can reimburse any Part B and Part D premiums for employees who are actively working.

How do I start a Section 105 plan?

Section 105 Plan Requirements

1. First, the plan must be fully employer-funded.
2. Third, you must be considered an employee of your business, meaning you must draw a regular W-2 salary or wages from the business in order to qualify as an employee in the eyes of the IRS.

Who can be excluded from nondiscrimination testing?

There are two categories of prohibited groups in DCAP nondiscrimination testing — “highly compensated employees” (HCE) and “5-percent owners.” Status as an HCE for DCAP testing purposes is determined using the same definition of highly compensated employee that is used in identifying highly compensated employees for …

Can an HRA be discriminatory?

However, HRAs are subject to non-discrimination testing under Section 105(h) of the Internal Revenue Code. These rules prohibit discrimination in favor of highly compensated individuals as to eligibility to participate and the benefits provided by the HRA.

What are the requirements of Section 105?

Section 105 sets the following requirements for an eligible plan: Employers are the sole contributors to the plan. In contrast to a Section 125 plan , a Section 105 plan cannot be funded through reduction of the employee’s salary, whether voluntary or involuntary. Reimbursements received…

What is a section 105 plan or HRA?

Section 105 Plans are used by employers in a variety of ways. For example, a common type of Section 105 Plan is a self-funded health benefit , where the employer reimburses employees for qualified health expenses rather than pay premiums to an insurance company. Section 105 Plans are also known as Health Reimbursement Arrangements (HRAs).

What is a section 105 medical reimbursement plan?

Section 105 Plans “for Dummies”. Section 105 plans are a type of reimbursement health plan that allows small businesses to reimburse their employees for medical costs tax-free. Health reimbursement arrangements (HRAs) are a popular type of Section 105 plan.

What is a section 105 plan document?

The Section 105 Plan Document describes the terms and conditions related to the operation and administration of the Section 105 Plan. The most common type of Section 105 plan is a self-funded (or self-insured) health plan, where the employer self-funds (or self-insures) health benefits rather than pay premiums to an insurance company.