Definition

Incidental Benefit Rule

The requirement that 401(h) medical benefits stay subordinate to retirement benefits in the same plan.

Full definition

Under Treas. Reg. §1.401-14, life-insurance and medical-benefit costs in a qualified plan must be incidental to the primary retirement benefit. For 401(h), aggregate contributions for medical benefits, when combined with life insurance, generally may not exceed 25% of the aggregate contributions to the plan (excluding contributions to fund past service credits).

Related terms

401(h) Account

A separate sub-account inside a qualified pension or annuity plan used to pay certain retiree medical benefits.

Separate Accounting

Mandatory bookkeeping that isolates 401(h) medical assets from retirement assets within the same trust.

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.