401H Unveiling the IRS Secret to $1.12M Tax Free Health Care

The 401H plan, while not as well-known as its popular counterpart, the 401(k), is a tax-advantaged health benefit plan designed to cover post-retirement medical expenses. It allows employers to make tax-free contributions on behalf of themselves and their employees. These contributions grow tax-free over time and, when the time comes, be used to cover medical expenses during retirement. These distributions are also tax-free, if they are used for qualifying medical expenses.

We make it as simple as adding a health benefit account to your existing pension plan. You can start using it at age 59½

Our Plans Include

Tax-free contributions and distributions, which reduce the overall tax burden on employees and allow for greater savings for healthcare expenses.
A dedicated source of funds for post-retirement medical expenses, ensuring that retirees have a financial safety net in place to cover healthcare costs
The ability to supplement other sources of retirement income, such as Social Security and pension plans, which may not be sufficient to cover rising medical expenses

What’s Covered

The idea that some medical expenses are "allowed" or "not covered" comes from what the insurance companies want to pay for, not the IRS tax code.

Any medical or healthcare expense, including cosmetic, Lasik, dental expenses. Long term care insurance or actual costs. Health premiums, gym memberships, personal trainers (see list below).

Who’s the Ideal Candidate?

Business Owner aged 40-65
50 or Fewer Employees
$500k+ Net Taxable Income
Wants to Optimize Tax Free Spending and Tax Deferred Planning

Who’s Using This?

There are 4,700+ plans in America now. Small and large companies. A small sample of names you might recognize use this plan:

Wells Fargo

Raytheon

Equifax

Verizon

Voya

Qwest

General Dynamics

Weyerhaeuser

Alcoa

Harley Davidson

USAA

Hawaii Medical Assoc

Kinder Morgan

UPS

BMW

Prudential

Lockheed Martin

Bank of America

Abbott Labs

Lucent Technologies

Southern California Edison

Anthem

Medtronic

Maryland State Education Trust

Bristol Myers

Merck

Estee Lauder

Capital One

Nationwide Insurance

Coca Cola

Chevron

New York Life Insurance

Siemens

Disney

Texas Instruments

Sempra Energy

Duke Energy

Eli Lilly

Citigroup

Hartford Insurance

Guardian Insurance

County of San Diego

Case Study Robert & Susan

Net Tangible Benefit:
$150k per year

Robert adds our plan and starts using tax free dollars for cosmetic surgery for himself and his wife Susan, pays his annual gym membership, long term care insurance premiums, medical insurance, copays on doctor and dental visits. His wife also takes advantage of several 401(h) benefits including hiring a personal trainer, weight loss specialist, and even enjoys a massage every week. Unfortunately, his dad had fallen ill and was forced to go into a nursing home facility and these expenses are all paid using pre-tax dollars. Should he or his wife eventually need assisted or long term care, the funds will be available. If he doesn’t use the money, it rolls down to his kids and they will enjoy the same benefits.

A man and woman are working together in a room with a laptop and potted plants.

A man wearing glasses and a brown shirt is reading a piece of paper.

Case Study Albert

Net Tangible Benefit:
$65k per year immediate from health care, plus additional ~$600 per year tax deferral

Albert has an existing 401k for his business and is maxing his contributions. Only one 401k is allowed, but multiple pensions are allowed if setup correctly. We setup a pension on his S Corp that manages all his rental properties, effectively neutralizing that taxable income and since Albert is already over age 59 ½ he immediately switches all his health care benefit expenses to tax free dollars saving~$65k per year.

What’s Covered?

Everything that would be covered in any other qualified medical plan

All Dental Procedures

LASIK eye surgery

Eyeglass frames

Insurance and insurance deductibles

Self-funded disability

Premiums for LTC

Spa Facilities, Usage Fees for Facilities

Dentures

Prosthetics

Dependent Care

Psychiatric Care

Dermatologist Care

Psychologist Fees

Diagnostic Fees

“Seeing-eye” Dog and its Upkeep

Drugs

Specialists and Specialized Treatments

Hair Transplants

Viagra

Health Insurance Premiums

Vitamins

Hearing Devices and Batteries

Alternative Medicines

Ambulance

Artificial Limbs

Artificial Teeth

Retirement Home for Medical Care

Assisted Living Facilities

Long Term Care, Nursing Homes

Asthma and Allergy Treatment

Medical Information Plan

Birth Control Pills

Electrolysis

Specially Equipped Cars

Experimental Care

Special Care Costs for Disabled Dependents

Eyeglasses, Including Examination Fee

Special Diets

Laser Surgery for Vision Correction

Sterilization Fees

Fees of Practical Nurse Support Groups

Fees for Healing Services

Surgical Fees

Fees of Chiropractors

Therapy Treatments

Fees for Fitness Programs and Facilities

Nurses Fees, Nurses Room and Board

Contact Lenses Including Exam Fee

Co-Pays Obstetrical Expenses Orthopedic Shoes

Cost for Care Outside the United States

Oxygen

Cost of Operations & Related

Treatments

Personal Trainers

Counseling

Physical Therapy

Crutches

Physician Fees

Deductibles

Transport Expenses for Medical Services

Fees of Licensed Osteopaths including Preventative Care

Flu Shots

Tuition at Special School for Handicapped

Wheelchair

HospiceWeight Loss Programs

Setting up a 401H plan

We make it easy for you. We do all the heavy lifting.'

If you're an employer interested in offering a 401H plan, here are the steps to set one up:
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Initial consultation with our office to determine if a 401H plan is suitable for your organization and employees.
Work with your TPA and create or amend your existing plan document that outlines the rules and provisions of the 401H plan, in accordance with IRS and Department of Labor guidelines.
We open a brokerage account for you to hold and manage the plan's assets
Provide employees with information about the plan, including its benefits, limitations, and the process for participating.
Regularly monitor and review the plan's performance to ensure that it continues to meet the needs of the organization and its employees.

The 401H plan is a valuable tool for high net worth individuals looking to minimize their tax burden and create a dedicated source of funds for post-retirement medical expenses. By understanding the rules, benefits, and steps to set up a 401H plan, employers and employees can take advantage of this lesser known but highly effective healthcare financing option.