-
What is a Section 105?
-
Who is eligible for a
Section 105?
-
What are the
advantages of a Section 105?
-
What are the
requirements of a Section 105?
-
Why
establish a Section 105 vs. Health Savings Account?
-
Why establish a
Section 105 vs. Section 125?
-
How much can
I save in taxes with a Section 105?
-
How do I participate in
a Section 105?
-
I am self-employed and I’m already deducting my insurance premiums. Why
do I need a Section 105 plan?
-
I am self-employed and I’m already deducting my medical expenses. Why do
I need a Section 105 plan?
-
What are eligible medical
expenses?
-
How do I get started
with a Section 105?
What is a Section 105?
A Section 105
or Health Reimbursement Account is a designated plan that allows employers
and the self employed to set aside a specific amount of money annually for
employees to use to pay for eligible health care medical expenses as defined
by the plan.
The Section
105 of the Internal Revenue Code has been around since 1954. Section 105
plans were used primarily by farmers to provide tax reductions to their
family members employed on the farm. Originally, the 80/20 indemnity plans
were used to provide the insurance in those Section 105 plans. Today those
same Section 105 plans provide valuable tax relief to the small business
owner.
Download
Free
Section 105 Guide
top
Who is eligible for a Section
105?
All employers
and sole proprietors are eligible for a Section 105. The plan documents need
to be in place and administered in order to take advantage of their
preferred tax treatment. When setting up a Section 105, the employer will be
given the opportunity to determine the eligibility requirements for
employees (one-on-one counseling available with every Section 105
enrollment).
Section 105
plans are useful for small business owners that can legitimately hire their
spouse such as farmers, over-the-road truckers, real estate agents,
insurance agents, etc. Because the spouse/employee can be reimbursed for
family medical expenses, the employer benefits as well.
Download
Free
Section 105 Guide
top
What are the advantages
of a Section 105?
- Save Money – By adjusting health
insurance coverage, implementing a Section 105 plan can generate
a savings in overall health benefits for the employer and
employee.
- Better Consumers – One key
solution to the rising costs of health care is to put more
choices in the hands of the consumers. By doing this, employees
search for the most effective and cost efficient care.
- Improved Employee Morale – The
employer’s expenditures for health care are visible and clear to
employees.
- Recruit and Retain Quality Employees
– Current and prospective employees view an employer in a
positive light because a benefit package is being provided with
the employee’s interest in mind.
Download
Free
Section 105 Guide
top
What are the
requirements of a Section 105?
An employer
gets to set the requirements of a Section 105 plan. Probationary periods,
hours worked per week, years of service worked and age requirements are all
options for the employer to set as requirements of a Section 105 plan.
Utilizing our free counseling services will empower you in making sure you
choose the most effective plan options.
Download
Free
Section 105 Guide
top
Why
establish a Section 105 vs. Health Savings Account?
The main
difference between a Health Reimbursement Arrangement (Section 105 HRA) and
a Health Savings Account (HSA) is that with a Section 105 HRA the employer
has control over the plan and the funds that are contributed to the plan.
Employees own the HSA funds but an employer owns the Section 105 HRA
funds. With the Section 105 HRA, an employer could allow carryover of
funds from year to year too. Section 105 HRA plans also save FICA or Self
Employment taxes which is an extra 15.3%
Download
Free
Section 105 Guide
top
Why establish a
Section 105 vs. Section 125?
The main
difference between a Section 105 plan and a Section 125 plan is that the
Section 105 plan can only be employer funded, while a Section 125 plan can
be employee and employer funded The Section 105 plan would be put into place
if the employer wanted to offer a benefit provided by the employer (i.e.,
health, disability or life insurance). A Section 125 plan is something that
can be set up for employees to use their own funding.
Download
Free
Section 105 Guide
top
How much can I
save in taxes with a Section 105?
All funds are
tax deductible for employers. All funds are tax-free for employees. The
average Section 105 plan participant utilizing our professional plan
services save an average $2450 annually in taxes. Utilizing professional
plan services, over 50,000 participants are enrolled nationally in these
plans.
Download
Free
Section 105 Guide
top
How do I participate in a
Section 105?
In Section 105
plans for small business owners (2-50 employees), the employee (which in
this case generally is the spouse) gets reimbursed from the owner/spouse.
Where the business owner cannot participate in a Section 105 HRA plan, the
spouse can. For this reason, Section 105 plans are by far the most appealing
options available as defined by the Internal Revenue Service. Again, because
the spouse/employee can be reimbursed for family medical expenses, the
owner/employer benefits as well.
In Section 105
plans for large employers (50+ employees), when an employee has a medical
expense, they would simply submit the expense to the Section 105 plan
administrator and then would receive their tax-free dollars in the mail from
the administrator. Once the employer sets up the plan, the dollars are
eligible to the employee at anytime in the plan year.
Download
Free
Section 105 Guide
top
I am self-employed and I’m already deducting my insurance premiums. Why do I
need a Section 105 plan?
As of 2003 to
present, 100% of health insurance premiums became tax deductible for the
self-employed. The self-employed person can take the deduction whether they
itemize or not. However, most tax payers are unaware that the 100% health
insurance deduction only affects income tax and does not reduce income when
calculating Social Security taxes. The 15.3% Self-Employment tax is still
paid on insurance premiums. If an employer elects to establish a Section 105
plan for a spouse/employee, the Social Security taxes are eliminated for
the employee as well as the employer. The beauty and the benefit of
Section 105 plans, permits employers to take the additional 15.3% deduction!
Download
Free
Section 105 Guide
top
I am self-employed and I’m already deducting my medical expenses. Why do I
need a Section 105 plan?
Medical
expenses are deductible if the self-employed itemizes deductions; however,
they are only able to write off deductions in excess of 7.5% of the Adjusted
Gross Income. Two examples:
-
If Adjusted
Gross Income is $50,000 and you have $5,000 in out-of-pocket
medical expenses, you can only deduct $1,250 ($50,000 X .075 =
$3,750 and $5,000 - $3,750 = $1,250).
-
If Adjusted
Gross Income is $40,000 and you have $3,000 in out-of-pocket
medical expenses, you can deduct $0 ($40,000 X .075 = $3,000 and
$3,000 - $3,000 = $0)!!
Download
Free
Section 105 Guide
top
What are eligible medical
expenses?
View
eligible
medical expenses for section 105 plans
Download
Free
Section 105 Guide
top
How do I get started with
a Section 105?
- Our plan document services provided by
TASC pioneered the use of Section 105 plans, allowing
family-owned businesses to deduct family health insurance
premiums and other out-of-pocket medical expenses. TASC provides
a long-term, value-oriented approach to your Section 105 plan.
However it’s measured – dollars and cents or reduction of
late-night headaches and worries – TASC provides consummate
value to our clients and providers.
- A true commitment to low overhead with a
no-nonsense approach helps keep our fees low and makes our
service affordable.
- TASC offers well seasoned financial
professionals with years of experience. We offer an unparalleled
level of customer service. We stand behind our services and make
sure everything is exactly right.
- An endorsement of technology. From
on-line communications to faster processing to the Benefits
Debit MasterCard, we recognize the importance of technology in
making many aspects of business more efficient. We continue to
use these methods as a way to save time, save money, improve
processes and generally make things easier.
- A promise. As we head into the future,
you can count on our growth and innovation to raise the level of
our services in every regard. Our goal remains to continually
increase customer satisfaction.
- Audit guarantee.
- Savings guarantee of $500 or your money
back!
Download
Free
Section 105 Guide
top
