§401(h) Domination
The complete §401(h) account resource for cash balance plan sponsors.
A §401(h) sub-account converts pre-tax business income into tax-free retiree medical funding — Medicare premiums, long-term care, and dependent medical, paid from a qualified trust at retirement. Twenty pages covering contribution limits, plan design, comparisons, and compliance.
Foundations
What Is a §401(h) Account? Tax-Free Retiree Medical Funding
A §401(h) account is a sub-account inside a defined benefit pension plan that pays for retiree medical expenses tax-free. Here is how it works.
6 min read
§401(h) Tax Benefits: Three-Layer Federal Tax Advantage
The combined federal tax benefit of a §401(h) account — deductible contributions, tax-deferred growth, and tax-free retiree medical distributions.
5 min read
Using §401(h) to Pay Medicare Premiums Tax-Free
How retirees use §401(h) distributions to pay Part B, Part D, Medicare Advantage, and Medigap premiums tax-free in retirement.
5 min read
§401(h) and Long-Term Care Insurance Premiums
How §401(h) sub-accounts reimburse qualified LTC insurance premiums within IRC age-based limits.
5 min read
Rules & Limits
§401(h) Contribution Limits: The 25% Subordination Rule
How the 25% subordination rule under IRC §401(h)(1) caps annual §401(h) contributions and how to model capacity inside a cash balance plan.
6 min read
§401(h) Qualified Medical Expenses: What You Can Pay For
A practical list of qualified retiree medical expenses payable tax-free from a §401(h) account, including Medicare, LTC, dental, and vision.
5 min read
§401(h) Eligibility: Who Can Sponsor One and Who Gets Coverage
What it takes to sponsor a §401(h) sub-account: a qualified DB plan, a written plan amendment, and compliance with subordination and nondiscrimination rules.
5 min read
Plan Design
§401(h) and Cash Balance Plans: The Optimal Pairing
Why cash balance plans are the natural host for a §401(h) sub-account, and how to size the medical layer relative to the cash balance contribution.
6 min read
§401(h) and Traditional Defined Benefit Plans
How a §401(h) sub-account attaches to a traditional defined benefit pension plan — same mechanics as cash balance, with a few actuarial differences.
5 min read
§401(h) Funding Strategy: How to Size Annual Contributions
Practical framework for sizing annual §401(h) contributions against cash balance funding, projected retiree medical spend, and subordination headroom.
6 min read
§401(h) Plan Design Checklist: 12 Items to Confirm Before Funding
A 12-item checklist that an actuary or TPA should clear before the first §401(h) contribution is made.
5 min read
§401(h) Cost to Set Up and Annual Maintenance
Typical setup cost and annual maintenance fees for adding a §401(h) sub-account to an existing cash balance plan.
4 min read
Comparisons
§401(h) Account vs. HSA: Which Is Better for Retiree Medical?
Compare the §401(h) account and the HSA across contribution capacity, Medicare rules, estate treatment, and use cases for retiree medical funding.
7 min read
§401(h) vs. Retiree HRA: A Side-by-Side Comparison
Compare §401(h) sub-accounts against retiree HRAs across funding, tax treatment, plan-design complexity, and beneficiary rules.
5 min read
Use Cases
§401(h) for Medical and Dental Practices
How physician-owned and dental practices use §401(h) sub-accounts to pre-fund retiree medical, layered on top of existing cash balance plans.
5 min read
§401(h) for Law Firms and Professional Partnerships
Why partner-track law firms with cash balance plans are strong §401(h) candidates and how partner-level contributions work.
5 min read
§401(h) for Professional Corporations and S-Corps
How professional corporations, PLLCs, and S-corps integrate §401(h) sub-accounts into a cash balance plan funded against W-2 owner compensation.
5 min read
Compliance
§401(h) IRS Compliance Rules and Audit Triggers
The IRS rules a §401(h) account must satisfy continuously, and the most common audit triggers for medical sub-accounts.
6 min read
§401(h) Beneficiary Rules and What Happens at Death
Who can receive §401(h) reimbursements, what happens at the participant's death, and why §401(h) is not an inheritable asset.
5 min read
10 Common §401(h) Mistakes and How to Avoid Them
The most common §401(h) implementation and operational mistakes that trigger IRS scrutiny or disqualify the medical sub-account.
6 min read