401h.Info

 

Section 401(h) of the Internal Revenue Code allows a pension or annuity plan to provide for payment of benefits for sickness, accident, hospitalization and medical expenses for retired employees, their spouses and dependents.  In order for the pension or annuity plan to meet the requirements of section 401(h), medical benefits must be (1) subordinate to pension benefits and (2) maintained in a separate account.  The great benefit, of course, is that contributions to a 401(h) will accumulate tax-free.  In addition to tax-free accumulation, the medical benefits provided through a 401(h) account are also tax-free to the retirees.