For your industry
401(h) for Medical & Dental Practices
A plain-English look at how owner-led medical and dental practices evaluate 401(h) sub-accounts.
Medical and dental practices are among the most common contexts in which a 401(h) account is evaluated. The structural fit is straightforward: many practices already sponsor — or are good candidates for — a defined benefit or cash balance plan, which is exactly the host vehicle 401(h) requires.
Why the fit comes up here
Pension chassis is often already in place
Profitable practices frequently already operate a defined benefit or cash balance plan to accelerate retirement savings beyond 401(k) limits. That qualified-plan infrastructure is the prerequisite for adding a 401(h) sub-account.
Stable, predictable cash flow
Retiree medical funding inside a DB plan requires ongoing, actuarially determined contributions. Established practices with steady collections are typically better positioned to sustain that obligation than businesses with highly cyclical revenue.
Small, long-tenured staff
Smaller practices with a stable employee base tend to fit nondiscrimination and incidental-benefit analysis more cleanly than businesses with large, transient workforces.
Key considerations
- Plan-document language must specifically authorize the 401(h) sub-account.
- Key-employee separate-accounting rules apply to physician/dentist owners.
- Incidental-benefit testing constrains how much can be contributed for medical benefits.
- Coordinated review by the actuary, ERISA counsel, CPA, and TPA is required.
Related reading
What Is a 401(h) Plan? A Plain-English Guide for Business Owners
A 401(h) account is a separate sub-account inside a qualified pension or annuity plan that may be used to fund retiree medical benefits. Here's the plain-English version every business owner should read first.
401(h) Plan Rules: What Business Owners and Advisors Need to Know
401(h) accounts are powerful but rule-driven. Five buckets — documentation, accounting, incidental benefit, nondiscrimination, and funding — determine whether the structure stands up.
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.
Next step
Find out whether a 401(h) strategy may fit
Talk with a 401(h) specialist about your plan, participant group, and retiree medical objectives.
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.