The BIG PICTURE for the Section 105 HRA

So many great businesses start small, and many choose to stay that way.  As a self-employed business owner, understanding and running your business is your life.  Being detail oriented and a visionary with your business when you wear so many hats, can sometimes mean there are some big picture items that fall through the cracks. One of those items might be health care expenses for your health and well-being, which could lead to thousands in missed tax savings for self-employed business owners.

What BIG PICTURE item can save self-employed business owners thousands in tax savings each year on health care spending?  The answer is the Section 105 Health Reimbursement Arrangement, which is an employer-sponsored health benefit plan that allows small business owners the opportunity to deduct up-to 100% of health care costs, such as individual insurance premiums and out-of-pocket health care, dental, and vision expenses, on a tax-free basis. 

The BASE® Section 105 HRA is especially applicable to the small business owner who can legitimately hire their spouse.  It helps to reduce the cost of health care insurance premiums and out-of-pocket health care expenses while saving money by not paying taxes on the reimbursement for eligible expenses.  On average, BASE® clients save $5,900 a year in valuable tax savings. 

The BASE® Section 105 HRA gives the self-employed business the best possible health care reimbursement plan.  The first requirement?  One employee only.  The second requirement?  Operate the business as one of the following:  Sole Proprietor, Partnership, C Corporation, or S Corporation. 

For example, when a self-employed business owner legitimately hires their spouse to work in the business, the employee-spouse purchases family health insurance coverage, and the business owner enrolls in the BASE® Section 105 HRA.  They reimburse their employee-spouse for their health care expenses, such as health insurance, copays, and other health care expenses not covered by the insurance.  The health care expenses will be incurred by the employee, the employee’s spouse (aka self-employed business owner), and the employee’s dependents.  BASE® will do the math – calculating in the federal tax bracket, the self-employment tax bracket, and state tax bracket, finding the self-employed business owner thousands of dollars a year in valuable tax savings. 

In the “BIG PICTURE” of things with the BASE® Section 105 HRA, personal health care expenses are turned into a business deduction.  The plan reimburses the employee-spouse for their family health care expenses tax-free, turning the reimbursements into a business expense on the tax return as an employee welfare benefits

BASE® can show self-employed business owners the “BIG PICTURE” and provide insight into the future savings that could be with this plan in place when it comes to the Section 105 HRA.  For more information contact BASE® at 888.386.9680 or visit

3 Typical ERISA Violations and Penalties

Employers that offer an employee health benefit plan, such as health insurance, Health Reimbursement Arrangements (HRAs), 125 Cafeteria Plans, to name a few, are subject to the provisions of ERISA. 

The Employee Retirement Income Security Act (ERISA) is a federal law that sets the minimum standards for health and welfare benefit plans to provide the protection for the participants in the employer-sponsored plans.  ERISA regulates plan administrators and sponsors of the health benefits to ensure they provide plan information to their participants and their dependents, and the offered benefits are outlined. 

The BASE® ERISA Wrap is a risk management tool that is designed to help employers provide the required provisions and information necessary to comply with the ERISA requirements and wrap around the existing certificates of insurance and benefit plan booklets with the Summary Plan Description (SPD) and Plan Document.  The ERISA Wrap applies to virtually all employers who sponsor a health benefits plan, regardless of size, structure, or number of participants. 

Violations of ERISA happen when a party has certain obligations imposed under the law and fail to live up to those obligations.  Three of the most common ERISA violations are:

  1. Improper denying benefits to current/former employees
  2. Breach of fiduciary duty toward those employees covered by the plan
  3. Interference with the rights of the employees covered by the plan

For those that commit ERISA violations, there are two ways to bring forward an investigation.  The first of these is if someone who is covered by the plan, files a complaint against the violator.  The second is through an action that was initiated by the Employee Benefits Security Administration, EBSA, which is a part of the DOL that enforces the laws related to ERISA. 

Under ERISA, there are two types of penalties for these violations.  The first is civil penalties such as fines, being required to change procedures or practices, or to make a payment to the plan participant.  Civil penalties are assessed on a case-by-case basis with the penalty amounts depending on the degree of willfulness in which the violations were committed. 

The second is criminal punishments, which the party may need to pay a fine and be found convicted of violating an ERISA requirement and may be imprisoned.  Criminal punishments can depend on the nature of the violation and the corresponding provision with the federal law.  For example, backdating paperwork relating to the plan, altering to make it appear that a transaction happened before it did, can result in severe penalties. 

The ERISA Wrap helps to protect the interests of the employee benefit plan participants, including their beneficiaries, and ensures they receive their appropriate benefits with access to the information about their health benefit plan. 

Employers may have questions about their obligations under ERISA and BASE® is here to help!  For more information contact BASE® at 888.386.9680 or visit