§401(h) follows the same definition of 'medical care' used in IRC §213(d), with a few §401(h)-specific layers. The list is broad and covers most of what a retiree household actually spends out of pocket.
Medicare-related premiums and costs
These are the most common §401(h) reimbursements in practice:
- Medicare Part B and Part D premiums
- Medicare Advantage (Part C) premiums
- Medicare Supplement (Medigap) premiums
- Out-of-pocket deductibles, copays, and coinsurance under Medicare
Long-term care premiums (within IRC limits)
Qualified LTC insurance premiums are reimbursable up to the IRC §213(d)(10) age-based annual limits, which scale from roughly $480 at age 40 or under to over $5,960 at age 71+.
Direct medical care
For the retiree, spouse, and tax-dependents:
- Physician, hospital, and specialist costs
- Prescription drugs
- Dental and orthodontia
- Vision exams, glasses, contact lenses
- Mental health and substance-use treatment
- Durable medical equipment (CPAP, mobility aids, etc.)
What does NOT qualify
Common exclusions to flag with retirees up front:
- Cosmetic surgery (unless reconstructive)
- General-purpose vitamins and supplements
- Health club dues without a specific medical prescription
- Most over-the-counter products without prescription documentation
Educational only. This page is for general education on §401(h) accounts and qualified retirement plan design. It is not individualized investment, tax, or legal advice. Consult a qualified fiduciary advisor, enrolled actuary, and ERISA counsel before adopting a §401(h) sub-account.