The basics
What is a 401(h) plan?
A 401(h) account is a separate sub-account within a qualified pension or annuity plan that may be designed to pay retiree medical benefits. It is not a 401(k). It is not an HSA. It is not a standalone consumer account.
A structural definition
Section 401(h) of the Internal Revenue Code permits qualified pension and annuity plans to include a separate account for retiree medical benefits. The medical benefits must remain subordinate (incidental) to the underlying retirement benefits — a key structural constraint that shapes how 401(h) is used in practice.
Why "sub-account" matters
Because the 401(h) portion is a sub-account of a qualified plan, the plan document, actuarial design, and ongoing administration of the underlying retirement plan all govern. There is no individual "401(h) account" that exists outside a qualified employer-sponsored plan.
Where it fits
401(h) strategies typically come up in the context of defined benefit or cash balance plans sponsored by stable, profitable businesses that want to formalize retiree medical benefits for a defined participant group.
Business
Employer contributions
Pension Plan
Qualified DB / Cash Balance
401(h)
Separate sub-account
Retiree Med
Qualified expenses
Illustrative. A 401(h) account is a separate sub-account within a qualified pension or annuity plan — not a standalone consumer account.
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
Want a guided walkthrough?
A 401(h) specialist can review your plan, participant group, and retiree medical goals and tell you whether the structure may fit.
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.