Section 105 Plans
A Flexible Health Benefit Solution for Employers
What is a Section 105?
A Section 105 plan is a tax-advantaged reimbursement arrangement that allows employers to reimburse employees for medical expenses. These plans provide businesses with a flexible and cost-effective way to offer health benefits while maximizing tax savings.
How Section 105 Plans Work
Section 105 plans enable employers to set aside funds for employees’ qualified medical expenses, including insurance premiums, copays, prescriptions, and other healthcare costs. Unlike traditional health insurance, these plans operate on a reimbursement basis, meaning employees pay for medical expenses upfront and then get reimbursed according to the plan’s guidelines.
Key Benefits of a Section 105 Plan
Tax Savings for Employers – Contributions made to a Section 105 plan are 100% tax-deductible for the business, reducing overall tax liability.
Tax-Free Benefits for Employees – Employees receive reimbursements tax-free, helping to reduce their out-of-pocket healthcare costs.
Flexible Plan Design – Employers can customize the plan to fit their budget and the needs of their workforce.
Cost Control – Unlike traditional group insurance, employers have more control over healthcare spending and can limit reimbursements as needed.
Ideal for Small Businesses & Self-Employed Individuals – Section 105 plans are particularly beneficial for small businesses, sole proprietors, and self-employed individuals looking for an affordable way to provide health benefits.
Types of Section 105 Plans
- Health Reimbursement Arrangements (HRAs) – Employer-funded plans that reimburse employees for eligible medical expenses.
- Self-Insured Medical Reimbursement Plans (SIMRPs) – Allows businesses to reimburse employees for medical expenses without offering a traditional group health plan.
- Individual Coverage Health Reimbursement Arrangement (ICHRA) – ICHRA allows employers to reimburse employees for individual health insurance premiums and medical expenses. This option provides flexibility, as employees can choose their own coverage while still receiving employer assistance.
- Qualified Small Employer HRAs (QSEHRAs) – Designed for small businesses with fewer than 50 employees, providing a way to offer tax-free health reimbursements.
Who Can Benefit from a Section 105 Plan?
- Small business owners looking for an alternative to costly group health insurance.
- Self-employed individuals seeking tax-advantaged healthcare solutions.
- Employers who want to offer health benefits without the administrative burden of traditional plans.
Start Maximizing Your Benefits Today
A Section 105 plan is a powerful tool for reducing healthcare costs and providing valuable benefits to employees. If you’re looking for a tax-efficient way to enhance your employee benefits package, contact us today to explore how a Section 105 plan can work for your business.
Do you need a Section 125?
A Section 125 Plan, also known as a Cafeteria Plan, is a tax-advantaged benefits program that allows employees to pay for certain expenses with pre-tax dollars. These plans help both employers and employees save money by reducing taxable income while offering flexible benefits options.
