Section 105 Medical Reimbursement Plan for Therapy Practices in Jacksonville, FL

Jacksonville is Florida's largest city by land area and one of its fastest-growing metros—and its behavioral health infrastructure is under significant strain. Baptist Behavioral Health, Cox Behavioral Health, and Ellie Mental Health all operate in Jacksonville, providing both employment for licensed therapists and a competitive labor market that private practices must navigate. For a therapy practice owner in Duval County, offering health benefits is not just a nicety—it directly affects whether the practice can attract and retain a licensed LMHC or LCSW in a market where those professionals have multiple options.

A Section 105 medical reimbursement plan provides a structured, IRS-compliant way to offer health benefits without the fixed costs of a traditional group health plan. Under IRC Section 105, the practice reimburses W-2 employees for qualified medical expenses—including individual health insurance premiums—as a tax-free employer benefit. The practice deducts the reimbursements. Employees exclude them from federal taxable income and from FICA taxes. Because Florida has no state income tax, the federal tax treatment is the complete picture.

Jacksonville's Behavioral Health Market: Why Benefits Matter

Jacksonville's therapy market has unique characteristics. The Navy and military presence in the area—Naval Air Station Jacksonville and Naval Station Mayport—creates a population segment with elevated mental health service demand and complex insurance situations, including TRICARE coverage. Private therapy practices serving active military and veterans often employ bilingual or specialty-trained therapists who are particularly difficult to recruit without a competitive benefits offering.

Additionally, the presence of University of Florida Health Jacksonville and Ascension St. Vincent's behavioral health services means that credentialed therapists who want employer-sponsored benefits have viable institutional alternatives. A Section 105 plan gives a small Jacksonville practice a way to match the benefit offer without matching the institutional employer's fixed cost structure.

Core Section 105 Plan Requirements

Jacksonville practice owners establishing a Section 105 plan must meet four IRS requirements:

• Written plan document: The plan must exist in writing before any reimbursements are made, specifying the plan year, eligible employees, covered expenses, and claims procedures.
• Nondiscrimination under IRC 105(h): The plan cannot disproportionately favor highly compensated individuals. Reimbursement limits must be structured fairly across all eligible employee classes.
• W-2 employment requirement: Only employees who receive a W-2 qualify. Independent contractors cannot participate.
• Substantiation: Each reimbursement requires documentation—an explanation of benefits (EOB), insurance premium statement, or medical receipt.

Section 105 vs. QSEHRA for Jacksonville Practices

Both plans allow tax-free reimbursement of individual insurance premiums. The Qualified Small Employer HRA (QSEHRA) caps annual reimbursements at $6,350 per individual and $12,800 per family (2025 IRS limits), while the Section 105 plan has no statutory dollar cap. The QSEHRA requires the practice to have fewer than 50 FTEs and offer no group plan. The Section 105 plan requires annual nondiscrimination testing under IRC 105(h).

For a Jacksonville practice with 3–8 W-2 employees and relatively even compensation, the Section 105 structure is often simpler because there is no annual limit that may leave employees with uncovered premium costs if they choose a more expensive plan.

Setting Up a Section 105 Plan: Steps for Jacksonville Practices

1. Audit employment classifications. Confirm which staff are W-2 employees. Jacksonville practices that use contractor therapist arrangements should review those classifications before establishing the plan.
2. Draft and formally adopt the plan document. Specify the plan year (typically January 1–December 31), waiting period for new employees, covered expense categories, reimbursement limits, and claims procedures.
3. Design reimbursement limits to pass 105(h). The simplest approach is a uniform flat dollar amount available to all eligible employees. Graduated amounts tied to tenure or position are acceptable if they pass the nondiscrimination test.
4. Establish the claims workflow. Employees submit monthly documentation. Approved reimbursements are processed through payroll and excluded from W-2 Box 1 wages.
5. Pair with ACA marketplace coverage. Employees in Duval County have access to multiple ACA marketplace carriers. Their premiums can be reimbursed under the Section 105 plan, subject to coordination with any premium tax credit they receive.

Florida-Specific Rules for Jacksonville Practices

No state income tax: Florida's absence of personal income tax means that Section 105 reimbursements are excluded only from federal income tax and FICA—there is no state income tax benefit. The practice takes a federal business expense deduction for the reimbursements.

Florida therapy licensing structure: Florida LMHCs, LCSWs, and MFTs operate under distinct licensing pathways. Regardless of license type, the Section 105 benefit turns on the W-2 employment relationship—not the specific license category held by the therapist.

ERISA considerations: A Jacksonville practice with two or more W-2 employees has an ERISA welfare benefit plan. A Summary Plan Description must be distributed to all participants. Practices with more than 100 plan participants must file Form 5500 annually.

Common Mistakes Jacksonville Therapy Practice Owners Make

• Reimbursing before the plan document is signed. The plan must be adopted before any reimbursements occur. Pre-plan reimbursements are treated as taxable wages.
• Setting discriminatory reimbursement limits. Generous limits for the owner and minimal limits for staff fail the 105(h) test.
• Including 1099 contractor therapists. Independent contractors cannot participate in a Section 105 plan regardless of their hours or exclusivity with the practice.
• Failing to distribute the Summary Plan Description. ERISA requires the SPD to be provided to all participants within 90 days of eligibility. This is commonly overlooked by small practices.

Frequently Asked Questions