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Small Business Employee Benefits and HR Blog

A Section 105 Plan is a Group Health Plan - Why This Matters

Section 105 - Group Health Plan RulesIf you are trying to wrap your head around the compliance requirements for a Section 105 medical reimbursement plan, here’s a good place to start: a Section 105 plan is a group health plan.

In this article I will discuss why Section 105 plans are considered group health plans, and why this important to understanding compliance.

Note - This topic was asked about during our recent webinar, Can Tax-Free Premium Reimbursement Work for You? If you'd like to download the on-demand webinar and slides, click here.

A Section 105 Medical Reimbursement Plan is a Group Health Plan

First, a Section 105 medical reimbursement plan is a group health plan.

What is a group health plan? A group health plan is defined as an employee welfare benefit plan established or maintained by an employer or by an employee organization (such as a union), or both, that provides medical care for participants or their dependents directly or through insurance, reimbursement, or otherwise.

This includes Section 105 plans. What is a Section 105 plan? A Section 105 plan allows tax-free reimbursement of medical and insurance expenses, as allowed under Section 105 of the Internal Revenue Code (IRC).

Section 105 plans are used by employers in a variety of ways. A 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. Section 105 plans are also frequently found in the form of medical reimbursement plans such as Health Reimbursement Accounts and Healthcare Reimbursement Plans.

Section 105 Plan Compliance Rules

As a group health plan, a Section 105 medical reimbursement plan must follow these applicable rules:

  • IRS Plan Document and non-discrimination rules

  • Affordable Care Act Market Reforms and applicable administrative requirements

  • ERISA rules for reimbursing individual health insurance policies, among other requirements

  • HIPAA privacy rules

  • COBRA, if applicable

Conclusion

Understanding that Section 105 medical reimbursement plans are group health plans can help you understand where they fit into the compliance puzzle. What questions do you have about Section 105 plans or compliance? Leave a comment below.

Further Resources

The Comprehensive Guide to the Small Business HRA