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Small Business Employee Benefits and HR Blog

Defined Contribution Health Plan

Rather than paying the cost to provide a specific health insurance plan (a "defined benefit"), an employer can elect to establish a defined contribution health plan, where he or she agrees upon a maximum monthly dollar amount which he or she is willing to reimburse to employees, their spouses and dependents, for medical expenses used. Employees are able to use their defined contribution to be reimbursed for health insurance expenses approved by their employer's plan. Once a qualified expense is incurred, they are reimbursed by the employer tax-free.