26 USC 105 - Amounts received under accident and health plans

U.S Code last checked for updates: Apr 27, 2024

§ 105.

Amounts received under accident and health plans

(a)

Amounts attributable to employer contributions

(b)

Amounts expended for medical care

(c)

Payments unrelated to absence from work

Gross 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Repealed.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 plans

For 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 213

(g)

Self-employed individual not considered an employee

(h)

Amount paid to highly compensated individuals under a discriminatory self-insured medical expense reimbursement plan

(1)

In general

(2)

Prohibition of discrimination

A self-insured medical reimbursement plan satisfies the requirements of this paragraph only if—

(A)

the plan does not discriminate in favor of highly compensated individuals as to eligibility to participate; and

(B)

the benefits provided under the plan do not discriminate in favor of participants who are highly compensated individuals.

(3)

Nondiscriminatory eligibility classifications

(A)

In general

A self-insured medical reimbursement plan does not satisfy the requirements of subparagraph (A) of paragraph (2) unless such plan benefits—

(i)

70 percent or more of all employees, or 80 percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all employees are eligible to benefit under the plan; or

(ii)

such employees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of highly compensated individuals.

(B)

Exclusion of certain employees

For purposes of subparagraph (A), there may be excluded from consideration—

(i)

employees who have not completed 3 years of service;

(ii)

employees who have not attained age 25;

(iii)

part-time or seasonal employees;

(iv)

employees not included in the plan who are included in a unit of employees covered by an agreement between employee representatives and one or more employers which the Secretary finds to be a collective bargaining agreement, if accident and health benefits were the subject of good faith bargaining between such employee representatives and such employer or employers; and

(v)

employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).

(4)

Nondiscriminatory benefits

(5)

Highly compensated individual defined

For purposes of this subsection, the term “highly compensated individual” means an individual who is—

(A)

one of the 5 highest paid officers,

(B)

a shareholder who owns (with the application of section 318) more than 10 percent in value of the stock of the employer, or

(C)

among the highest paid 25 percent of all employees (other than employees described in paragraph (3)(B) who are not participants).

(6)

Self-insured medical reimbursement plan

(7)

Excess reimbursement of highly compensated individual

For purposes of this section, the excess reimbursement of a highly compensated individual which is attributable to a self-insured medical reimbursement plan is—

(A)

in the case of a benefit available to highly compensated individuals but not to all other participants (or which otherwise fails to satisfy the requirements of paragraph (2)(B)), the amount reimbursed under the plan to the employee with respect to such benefit, and

(B)

in the case of benefits (other than benefits described in subparagraph (A)) paid to a highly compensated individual by a plan which fails to satisfy the requirements of paragraph (2), the total amount reimbursed to the highly compensated individual for the plan year multiplied by a fraction—

(i)

the numerator of which is the total amount reimbursed to all participants who are highly compensated individuals under the plan for the plan year, and

(ii)

the denominator of which is the total amount reimbursed to all employees under the plan for such plan year.

In determining the fraction under subparagraph (B), there shall not be taken into account any reimbursement which is attributable to a benefit described in subparagraph (A).

(8)

Certain controlled groups, etc.

(9)

Regulations

(10)

Time of inclusion

(i)

Sick pay under Railroad Unemployment Insurance Act

(j)

Special rule for certain governmental plans

(1)

In general

(2)

Plan described

An accident or health plan is described in this paragraph if such plan is funded by a medical trust that is established in connection with a public retirement system or established by or on behalf of a State or political subdivision thereof and that—

(A)

has been authorized by a State legislature, or

(B)

has received a favorable ruling from the Internal Revenue Service that the trust’s income is not includible in gross income under section 115 or 501(c)(9).

(3)

Qualified taxpayer

For purposes of paragraph (1), with respect to an accident or health plan described in paragraph (2), the term “qualified taxpayer” means a taxpayer who is—

(A)

an employee, or

(B)

the spouse, dependent (as defined for purposes of subsection (b)), or child (as defined for purposes of such subsection) of an employee.

(Aug. 16, 1954, ch. 736, 68A Stat. 30; Pub. L. 87–792, § 7(e), Oct. 10, 1962, 76 Stat. 829; Pub. L. 88–272, title II, § 205(a), Feb. 26, 1964, 78 Stat. 38; Pub. L. 94–455, title V, § 505(a), title XIX, § 1901(c)(2), Oct. 4, 1976, 90 Stat. 1566, 1803; Pub. L. 95–600, title III, § 366(a), title VII, § 701(c)(1), Nov. 6, 1978, 92 Stat. 2855, 2899; Pub. L. 96–222, title I, § 103(a)(13)(B), (C), Apr. 1, 1980, 94 Stat. 213; Pub. L. 96–605, title II, § 201(b)(1), Dec. 28, 1980, 94 Stat. 3527; Pub. L. 96–613, § 5(b)(1), Dec. 28, 1980, 94 Stat. 3581; Pub. L. 97–34, title I, §§ 103(c)(2), 111(b)(4), Aug. 13, 1981, 95 Stat. 188, 194; Pub. L. 97–248, title II, § 202(b)(3)(C), Sept. 3, 1982, 96 Stat. 421; Pub. L. 98–21, title I, § 122(b), Apr. 20, 1983, 97 Stat. 87; Pub. L. 98–76, title II, § 241(a), Aug. 12, 1983, 97 Stat. 430; Pub. L. 98–369, div. A, title IV, § 423(b)(2), July 18, 1984, 98 Stat. 800; Pub. L. 99–514, title XI, § 1151(c)(2), title XIII, § 1301(j)(9), Oct. 22, 1986, 100 Stat. 2503, 2658; Pub. L. 101–140, title II, § 203(a)(1), Nov. 8, 1989, 103 Stat. 830; Pub. L. 108–311, title II, § 207(9), Oct. 4, 2004, 118 Stat. 1177; Pub. L. 110–458, title I, § 124(a), Dec. 23, 2008, 122 Stat. 5114; Pub. L. 111–152, title I, § 1004(d)(1), Mar. 30, 2010, 124 Stat. 1035; Pub. L. 113–295, div. A, title II, § 221(a)(16), Dec. 19, 2014, 128 Stat. 4039; Pub. L. 114–113, div. Q, title III, § 305(a)–(c), Dec. 18, 2015, 129 Stat. 3088; Pub. L. 115–141, div. U, title IV, § 401(a)(36), Mar. 23, 2018, 132 Stat. 1186.)

cite as: 26 USC 105