Definition

Separate Accounting

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

Full definition

Although 401(h) assets may be invested with the rest of the trust, contributions, earnings, and disbursements allocable to the 401(h) account must be tracked separately from the retirement portion of the plan. Failure to maintain separate accounting can jeopardize plan qualification.

Related terms

401(h) Account

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

Incidental Benefit Rule

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

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.