What is the Internal Revenue Service Code 105?
A Medical Reimbursement Plan is any plan or arrangement under which an employer reimburses an employee for uninsured health or accident expenses incurred by the employee or his dependents. Health or accident expenses in this context are defined in the Internal Revenue Code Section 213 (d). Section 105 plans are sometimes found inside Section 125 Cafeteria Plans in the form of Medical Flexible Spending Accounts (FSAs). It is permissible, under Section 105, to implement a medical reimbursement plan along side a conventional health insurance plan to reimburse amounts not covered by insurance. A Medical Expense Reimbursement Plan (MERP) is a plan that has a maximum employee benefit per year. If and when an employee has a claim, the employer will reimburse up to a certain benefit maximum. MERP can only have employer contributions, and there is no rollover permitted. The employer keeps the funds, not the employee. A MERP is much more flexible than an HRA.
