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How Your Business Can Use a Tax-Free Health Insurance Reimbursement Plan (THIRP) – Free Webinar

savingsIf you are self-employed or a small business owner, you should consider setting up a health insurance reimbursement plan through your business. Also known as a THIRP, these defined contribution plans allow business owners to help employees pay their health insurance premiums. Employees choose individual coverage, on or off the exchange.

HRAs Are a Thing of The Past

Regardless of whether it is required or not, many employers choose to provide some benefits in order to increase employee retention and morale. In the past, many have used an HRA (Health Reimbursement Arrangement) or an FSA (Flexible Spending Arrangement) to help their employees with their health care costs.

Now that the Affordable Care Act has been officially launched, there have been some changes that affect the way small businesses can provide health benefits to their employees. For example, under the ACA, an HRA is no longer an option unless a high-deductible health plan (HDHP) is in effect. For many small businesses, adding the cost of a small group health plan is not a viable option.

THIRPs Are Taking Their Place

However, there is a new product on the scene that could help employers continue to provide some benefits for their employees without having to provide a small group health policy. Instead of an HRA, employers can now implement a Tax-free Health Reimbursement Plan, or THIRP.

A THIRP is a defined contribution plan, meaning you can contribute specific amounts of money to your employees to be used to pay insurance premiums on their own individual health policies. You can define their contributions on your own, with no government mandates. For example, you can say that every full-time employee will receive X amount, while part-time employees receive a different amount. As long as employees in comparable positions (such as office staff) receive the same amount, you can choose the amount.

Benefits to Employers and Employees

There are significant tax benefits to you as the employer, since the defined contribution amounts are tax free. Additionally, a THIRP allows you the freedom to decide how much to contribute as well as how often you want to make the contributions.

A THIRP is also a good choice for your employees. Your employees will be able to make their own choices regarding which health insurance plan will best suit their needs, and the amount you contribute will help pay the premiums. Since a THIRP is not a health plan, your employees can still take advantage of any premium subsidies or tax credits available to them, as well as cost sharing subsidies.

Free Webinar for More Information

Attend our free webinar on December 3 at 7:00 pm (EST) to learn more about a THIRP and how it can benefit both your business and your employees. Our expert on health care reform, Fred Adams, will present to you the different ways a THIRP can be a useful tool in your business, as well as answer any questions you might have.

To register for our free webinar, please visit our HSA Webinar page and fill out the required information. In just a few moments, you can be on your way to creating a win-win health care scenario for you and your employees.

Wiley Long

Wiley Long

Wiley Long is President of HSA for America, and a passionate advocate for consumer-based solutions that will improve price transparency and lower health insurance and medical costs for people purchasing individual and family health insurance plans.
Wiley Long

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  • David Smith

    How is this legal? Under what IRS Code Section can you create a THIRP? How is this not prohibited by IRS Notice 2013-54?

  • admin

    Hi David,

    A THIRP can be created under IRS Code 105. Section B speaks to an employer’s ability to reimburse an employee’s medical expenses (in this case the cost of insurance premiums) without affecting the taxpayer’s gross income.

    The rule to which you refer includes Revenue Ruling 61-146 which holds that if an employer reimburses an employee’s substantiated premiums for non-employer sponsored hospital and medical insurance, the payments are excluded from the employee’s gross income under Code § 106.”

    You can also refer to IRS Code § 105(b) which provides an exception to the general rule requiring inclusion in income. Section 105(b) provides that, except in the case of amounts
    attributable to (and not in excess of) deductions allowed under § 213 (relating to
    medical expenses) for any prior taxable year, gross income does not include
    amounts paid, directly or indirectly, to the taxpayer to reimburse the taxpayer for
    expenses incurred by the taxpayer for the medical care (as defined in § 213(d))
    of the taxpayer or the taxpayer’s spouse or dependents (as defined in § 152).

    A THIRP is not combined with any employer-based group health coverage so it is not a taxable benefit.

    Hope this sheds more light on the validity of Tax-free Health Insurance Reimbursement plans. Thanks for your question!

  • David Smith

    Isn’t this basically an HRA to reimburse premiums? How is it different than an HRA?

  • Wiley Long

    Yes, it is essentially another name for a type of HRA.