Technical Links  Section 105
Medical Expense Reimbursement

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Section §105 Discrimination Testing, Rules & Definitions –

IRS publication on Fringe Benefits 15 b

Publication 502 Medical and Dental Expenses Specific listing of each allowable expense

Guidance on the Application of Code § 4980D to Certain Types of Health Coverage Reimbursement Arrangements     Notice 2015 – 17 explanation of discrimination rules

IRS Code Section 162

Explanation of above and below the line deductions Motley

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Qualified Filing Statuses  While the above rulings specifically address family employment in a sole proprietorship, corporations and partnerships may also take advantage of Section §105 plan. Additionally, employers seeking to offer non-related employees a medical benefits package may also implement such a plan. Here is how a Section 105 plan would work within the various filing statuses S-Corporations S-Corporations can qualify for a Section §105 plan,

Two percent or greater shareholder must pay attention to these special rules

  • Revenue Ruling 91-26 and
  • Announcement 92-16

Employees not owning stock in the corporation may realize substantial savings by participating in a Section 105 plan. (tasc

§3121. Definitions (a) Wages For purposes of this chapter, the term ?wages? means all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include? (2) the amount of any payment (including any amount paid by an employer for insurance or annuities, or into a fund, to provide for any such payment) made to, or on behalf of, an employee or any of his dependents under a plan or system established by an employer which makes provision for his employees generally (or for his employees generally and their dependents) or for a class or classes of his employees (or for a class or classes of his employees and their dependents), on account of? (B) medical or hospitalization expenses in connection with sickness or accident disability, or

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Notice 2013-54 addresses situations where an employer provides health benefits outside of a traditional group health plan (such as through reimbursement for individual policies, an HRA or FSA) and clarifies that such arrangements will be treated as group health plans. (The IRS has provided guidance here: The primary issue that this notice addresses is not the deductibility of these premiums as an ordinary and necessary business expense, but the penalties that can be imposed under the ACA for these types of arrangements in situations where the arrangement fails to comply with ACA provisions. Of course, the primary issue is whether the employer is required to provide health insurance at all–and if the employer has zero full-time employees, it is not required to provide insurance. However, if the employer chooses to provide reimbursement, it should be advised that its Section 105 medical reimbursement plan must now meet the new ACA prohibition on annual benefit limits and the preventative care requirements.

Guidance on the Application of Code § 4980D to Certain Types of Health Coverage Reimbursement Arrangements     Notice 2015 – 17

Other Pages in the Section §105 – Medical Expense Reimbursement Section