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

The University of South Florida launched Florida's first interactive behavioral health workforce dashboard in October 2025, and the data it revealed about Hillsborough County was stark: shortages of licensed clinical social workers, licensed mental health counselors, and marriage and family therapists were concentrated not only in rural areas but in urban Tampa neighborhoods as well. USF Health's own behavioral health program and Tampa General Hospital recruit actively from the same licensed therapist pool that small private practices depend on. In this environment, a Tampa therapy practice that offers no health benefit is competing at a structural disadvantage for every hire.

A Section 105 medical reimbursement plan provides a tax-efficient mechanism for practice owners to offer health benefits without the fixed overhead of a group insurance policy. Under IRC Section 105, the practice reimburses W-2 employees for qualified medical expenses—including individual insurance premiums—and deducts those reimbursements as a business expense. Employees exclude the reimbursements from federal taxable income and from FICA (Social Security and Medicare) taxes. In Florida, where there is no state income tax, the federal exclusion is the complete picture of the tax benefit.

Tampa's Competitive Therapy Market and Why Benefits Matter

Hillsborough County's mental health landscape includes a significant shortage designation pressure. The USF behavioral health workforce dashboard—operated by the Florida Mental Health Institute at USF's College of Behavioral and Community Sciences—tracks shortages across six licensed behavioral health professions statewide. Florida needs over 3,500 additional licensed clinical social workers and over 1,000 additional licensed mental health counselors, and Hillsborough is not exempt from those numbers.

For a Tampa therapy practice owner, this means the recruiting environment is genuinely competitive. A licensed LMHC has multiple options: employment at Tampa General or AdventHealth Tampa, contract work through telehealth platforms, or joining an established group practice that offers benefits. Offering health reimbursements through a Section 105 plan does not require meeting minimum enrollment thresholds or paying fixed monthly premiums to an insurer—the practice simply reimburses employees up to a set amount for their documented health expenses.

Section 105 Plan Fundamentals for Tampa Practices

Before establishing the plan, practice owners need to understand the four core requirements:

• Written plan document: The plan must be formally adopted in writing before any reimbursements are made. This document defines the plan year, eligible employee classes, covered expense categories, maximum reimbursement amounts, and the claims submission process.
• Nondiscrimination under IRC 105(h): The plan cannot favor highly compensated employees. An owner who reimburses themselves at $600/month while limiting staff to $100/month creates a discriminatory plan. The nondiscrimination test has both an eligibility component and a benefits component.
• Employment relationship: Only W-2 employees are eligible. A 1099 contractor therapist—even one who works exclusively at your Tampa practice—cannot receive tax-free reimbursements under a Section 105 plan.
• Substantiation: Each reimbursement requires documentation—an explanation of benefits (EOB) from an insurer, an insurance premium statement, or a receipt showing the nature and amount of the medical expense.

Section 105 vs. QSEHRA: The Tampa Practice Choice

The Qualified Small Employer HRA (QSEHRA) is an alternative vehicle. Tampa practices with fewer than 50 FTEs that do not offer a group plan can use a QSEHRA to reimburse up to $6,350 per individual and $12,800 per family (2025 IRS limits). Section 105 plans have no statutory dollar cap but require annual nondiscrimination testing.

A Tampa practice with uniform compensation among its therapist staff will typically find the Section 105 route easier to administer once the nondiscrimination test is designed correctly. A practice with a significant compensation spread between the owner and staff may find that QSEHRA's fixed limits simplify compliance by removing the nondiscrimination variable.

Setting Up the Plan for a Tampa Therapy Practice

1. Classify your workers. Identify all W-2 employees and document contractor relationships separately. This classification determines who can participate.
2. Draft the plan document. The document should specify plan year, eligibility class (e.g., full-time W-2 employees who have completed a 60-day waiting period), covered expense categories, reimbursement limits, and the claims process.
3. Establish reimbursement limits that pass 105(h). Design the benefit schedule with nondiscrimination testing in mind. Consider applying a uniform percentage of salary or a flat dollar amount applicable to all employees.
4. Set up the claims workflow. Employees submit monthly expense documentation. The practice approves and processes the reimbursement through payroll. The amount is excluded from W-2 Box 1 wages.
5. Coordinate with ACA marketplace coverage. Tampa employees who use individual ACA marketplace plans—available through Healthcare.gov with Hillsborough County zip codes—can have their premiums reimbursed. Review the interaction with premium tax credits annually.

Florida-Specific Rules for Tampa Therapy Practices

No state income tax: Florida has no personal income tax, so the entire tax benefit of a Section 105 plan is at the federal level. Tampa practices benefit from the federal business expense deduction; employees benefit from exclusion of reimbursements from federal income and FICA taxes.

Florida licensing requirements: Florida LMHCs, LCSWs, and MFTs often work in multiple settings simultaneously. A therapist who holds a W-2 position at your Tampa practice and separately contracts with a hospital system is still eligible for your Section 105 plan based on their W-2 status with your practice. The plan turns on the employment relationship, not on exclusivity.

ERISA compliance: Multi-employee Tampa practices should treat the Section 105 plan as an ERISA welfare benefit plan. This requires a Summary Plan Description (SPD) distributed to all participants, formal claims and appeals procedures, and potentially Form 5500 filing for plans with 100 or more participants.

Common Mistakes Tampa Therapy Practice Owners Make

• Reimbursing expenses before formally adopting the plan. The plan must be written and adopted before any reimbursements occur. Retroactive reimbursements may be treated as taxable compensation.
• Failing the nondiscrimination test. Setting generous limits for the owner and minimal limits for staff is the most common compliance failure. Design the benefit structure before you start reimbursing.
• Including 1099 contractors. The Tampa area has many therapists who split time between practices under contractor arrangements. They are not eligible for the Section 105 plan.
• Skipping the ERISA documentation requirement. Many small Tampa practices establish the plan but fail to distribute the required SPD to participants.

Frequently Asked Questions