Is it the same as a 401(k)?

No. A 401(k) is an elective-deferral defined contribution plan. 401(h) is a medical sub-account inside a qualified pension or annuity plan.

Is it the same as an HSA?

No. An HSA is an individually owned, portable account; 401(h) is part of an employer plan.

Is it the same as an HRA?

No. An HRA is an employer reimbursement arrangement governed by group-health rules; 401(h) lives in the qualified-plan world.

Who can open a 401(h)?

Individuals cannot 'open' one. It exists only inside a qualified pension or annuity plan sponsored by an employer.

Does it require a DB plan?

It requires a qualified pension or annuity plan. In practice this almost always means a DB or cash balance plan.

Are contributions deductible?

Generally yes, subject to applicable qualified-plan deduction rules. Coordinate with your CPA.

Are benefits taxable to retirees?

Qualified medical benefits are generally not taxable when paid for qualified medical expenses, subject to plan terms and applicable law.

Is there a contribution dollar cap?

Not a single statutory dollar cap. The incidental-benefit rule effectively constrains funding.

What is the incidental-benefit rule?

Medical benefits under 401(h) must be subordinate to the underlying retirement benefits provided by the plan.

Can owners participate?

Owners can participate, subject to nondiscrimination and the incidental-benefit rule.

Can spouses and dependents be covered?

If the plan provides for it, yes.

What expenses are eligible?

Whatever the plan document defines as qualified retiree medical expenses, within the bounds of applicable law.

Can Medicare premiums be reimbursed?

Often yes — but plan terms control. Confirm in writing.

What about long-term care premiums?

Frequently a candidate, subject to plan design and applicable law.

How are assets invested?

Within the qualified trust, subject to the plan's investment policy and the requirement for separate accounting.

Who administers the medical claims?

Typically the plan's recordkeeper or a TPA, following procedures defined in the plan.

Are 401(h) plans reported on Form 5500?

Yes — they are part of the qualified plan and are reflected in the plan's reporting.

Can I add 401(h) to an existing DB plan?

Yes, via plan amendment with the right language and actuarial integration.

Can I add 401(h) to a cash balance plan?

Yes — cash balance plans are DB plans for these purposes.

Can 401(h) be added to a 401(k)?

No — 401(k) plans are not qualified pension or annuity plans for 401(h) purposes.

What happens if the plan is overfunded?

Specific statutory rules govern reversion and forfeiture. Coordinate with the actuary and ERISA counsel.

What if the company changes ownership?

Plan continuity, amendments, and benefit obligations all need to be reviewed as part of the transaction.

Is this worth it for a very small business?

Sometimes — but the analysis is highly fact-specific and the ongoing commitment is real.

Who should I call first?

Typically the plan's actuary and ERISA counsel, with your CPA in the loop.

FAQs

401(h) Plan FAQ: 25 Questions Answered

A consolidated FAQ covering 25 of the most-asked 401(h) questions in one place — written for business owners, CPAs, and advisors.

By 401h.com EditorialPublished Jun 15, 2026Updated Jun 15, 202615 min read

Contents

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Quick answers

Key takeaways

401(h) is a sub-account inside a qualified pension or annuity plan.
It pays retiree medical benefits for a defined class.
Plan documents and applicable law govern every detail.
Professional review is required — there are no shortcuts.

Read this first

The questions below are introductory and educational. Specific outcomes depend on the underlying plan document, applicable law, and the participant facts in front of you. Always confirm with qualified professionals before acting.

Quick answers

Click any of the questions in the FAQ section below for plain-English answers to the most common 401(h) questions advisors hear.

What 401(h) is — and what it is not.
How it relates to 401(k), HSA, and HRA.
Who can participate.
How it is funded and tested.
How benefits are paid.

Frequently asked questions

A separate sub-account within a qualified pension or annuity plan that may pay retiree medical benefits, authorized by Section 401(h) of the Code.

Availability, tax treatment, and plan design depend on the facts and circumstances of the employer, plan document, participant group, and applicable law. 401h.com provides general educational information only — not tax, legal, actuarial, investment, or ERISA advice. Consult qualified tax, legal, actuarial, and plan professionals.

401h.com Editorial

401h.com

The 401h.com editorial team publishes plain-English explainers on 401(h) retiree medical benefit plans. Educational only — not tax, legal, actuarial, investment, or ERISA advice.

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401(h) Plan FAQ: 25 Questions Answered

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