Medical Reimbursement Plans (HRA/ICHRA)
Tax-Advantaged Health Benefits for Business Owners
Health Reimbursement Arrangements (HRAs) and Individual Coverage HRAs (ICHRAs) allow businesses to reimburse employees tax-free for medical expenses and health insurance premiums. For S-Corp owner-employees, these arrangements can provide significant tax benefits on healthcare costs that would otherwise be paid with after-tax dollars or subject to employment taxes.
See Your Potential Savings
Based on a typical client profile for this strategy
Real Results: Client Success Story
"An S-Corp owner establishes an ICHRA reimbursing $15,000 annually for individual health insurance premiums. The reimbursement is tax-free to the owner and deductible to the corporation, avoiding FICA taxes."
*Illustrative scenario for educational purposes. Tax savings depend on individual circumstances, income level, entity structure, and proper implementation. Consult with a tax professional to determine eligibility.
Do You Qualify? Quick Self-Assessment
This strategy may be right for you if:
Check 3 or more? You may be a good candidate for this strategy. Schedule a free consultation to calculate your potential savings.
Investment Levels
- Current situation analysis
- Tax reduction opportunities
- Action item roadmap
- Follow-up summary
- Full financial analysis
- Multi-year projections
- Entity optimization
- Implementation support
- Quarterly planning calls
- Transaction review
- Legislative updates
- Priority access
- Structure analysis
- Document preparation
- IRS filings
- Transition planning
Related Strategies
Explore the Details
For those who want to understand the full picture
Real-World Example: Before & After
An S-Corp owner establishes an ICHRA reimbursing $15,000 annually for individual health insurance premiums. The reimbursement is tax-free to the owner and deductible to the corporation, avoiding FICA taxes.
BEFORE Strategy
AFTER Strategy
$15K reimbursed tax-free vs. paid with after-tax dollars. At 33.4% combined rate (income + FICA) = $5,010 savings. S-Corp owners can avoid including premiums on W-2 through proper ICHRA structure.
IRS Authority & Professional References
Key Benefits
- Tax-free reimbursement for medical expenses
- Corporation deducts reimbursement
- No FICA taxes on reimbursements
- ICHRA allows individual policy selection
- Flexible design options
- Works for businesses of any size
Requirements & Risks
Requirements:
- •Formal plan document required
- •Must integrate with ACA-compliant coverage (HRA)
- •ICHRA must offer affordable coverage
- •Cannot offer both group plan and ICHRA to same class
- •Same terms for similar employee classes
- •Substantiation of medical expenses
Risks to Consider:
- !Complex integration rules with ACA
- !Shareholder-employees subject to special rules
- !2% S-Corp shareholders may have different treatment
- !Administration requirements
- !Employee classes must be defined properly
- !State law variations may apply
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