Frequently Asked Questions
Who is eligible for the Employer-Provided Medical Expense Exclusion?
Employees receiving reimbursements under an employer-sponsored accident or health plan; self-insured plans must meet specific non-discrimination requirements.
How does the Employer-Provided Medical Expense Exclusion work?
Excludes from gross income any amounts paid by an employer to reimburse an employee for medical care expenses for themselves, their spouse, dependents, or children under age 27.
What law authorizes the Employer-Provided Medical Expense Exclusion?
The Employer-Provided Medical Expense Exclusion is authorized under IRC §105 of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §105
Source: Internal Revenue Code, Title 26, United States Code
§ 105. Amounts received under accident and health plans(a) Amounts attributable to employer contributionsExcept as otherwise provided in this section, amounts received by an employee through accident or health insurance for personal injuries or sickness shall be included in gross income to the extent such amounts (1) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (2) are paid by the employer.
(b) Amounts expended for medical careExcept in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include amounts referred to in subsection (a) if such amounts are paid, directly or indirectly, to the taxpayer to reimburse the taxpayer for expenses incurred by him for the medical care (as defined in section 213(d)) of the taxpayer, his spouse, his dependents (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), and any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27. Any child to whom section 152(e) applies shall be treated as a dependent of both parents for purposes of this subsection.
(c) Payments unrelated to absence from workGross income does not include amounts referred to in subsection (a) to the extent such amounts—(1) constitute payment for the permanent loss or loss of use of a member or function of the body, or the permanent disfigurement, of the taxpayer, his spouse, or a dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), and
(2) are computed with reference to the nature of the injury without regard to the period the employee is absent from work.
[(d) Repealed. Pub. L. 98–21, title I, § 122(b), Apr. 20, 1983, 97 Stat. 87]
(e) Accident and health plansFor purposes of this section and section 104—(1) amounts received under an accident or health plan for employees, and
(2) amounts received from a sickness and disability fund for employees maintained under the law of a State or the District of Columbia,
shall be treated as amounts received through accident or health insurance.
(f) Rules for application of section 213For purposes of section 213(a) (relating to medical, dental, etc., expenses) amounts excluded from gross income under subsection (c) shall not be considered as compensation (by insurance or otherwise) for expenses paid for medical care.
(g) Self-employed individual not considered an employeeFor purposes of this section, the term “employee” does not include an individual who is an employee within the meaning of section 401(c)(1) (relating to self-employed individuals).
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