Business Tax Strategy · ProfitGuard Plus
The Tax Code Behind
ProfitGuard Plus
Owners hear "four IRS codes" and want to know what those codes actually say. Fair. Here is each section in a few sentences, what job it does inside ProfitGuard Plus, and a link to the statute text so you or your CPA can read it yourself.
Quick answer
- ProfitGuard Plus is built on four sections of the Internal Revenue Code: 125, 106(a), 105, and 213(d).
- Section 125 is the cafeteria plan. It lets an employee make a pre-tax election from gross wages.
- Section 106(a) lets the employer's health dollars flow to employees pre-tax, on top of Section 125.
- Section 105, with Treasury Reg 1.105-11, is the Self-Insured Medical Reimbursement Plan, or SIMRP. It reimburses employees tax-free, on its own, not through the cafeteria plan.
- Section 213(d) defines what counts as medical care for tax purposes. It is the reason real care gets reimbursed and step counts and gift cards do not.
- Each section does one job. Together they lower the employer's FICA bill and raise employee take-home pay without changing gross pay.
- None of this is new law. These sections have been on the books for years.
- The statute text is public. Each section below links to it.
The four sections, one at a time
Each one does a specific job. Read them in order and the structure explains itself.
Section 125
The cafeteria plan
This is the front door. Section 125 lets an employee elect to set aside part of their gross wages before tax. That pre-tax election is what makes the rest of the structure possible. On its own, a cafeteria plan is common. Most employers with a benefits package already have one.
Read the statute textSection 106(a)
Employer health contributions
Section 106(a) says the employer's contributions to an employee's health coverage are not counted as the employee's income. In ProfitGuard Plus, it lets the employer's health dollars flow to employees pre-tax, stacked on top of the Section 125 election.
Read the statute textSection 105 + Treasury Reg 1.105-11
The SIMRP
Section 105 covers amounts an employee receives under an employer health plan. With Treasury Reg 1.105-11, it supports a Self-Insured Medical Reimbursement Plan, or SIMRP, that reimburses employees tax-free. The key point: the SIMRP does this on its own, not through the cafeteria plan. That separation is the structural choice most copycat programs got wrong.
Read the statute textSection 213(d)
What counts as medical care
Section 213(d) is the definition of medical care in the tax code. It is the test for what the SIMRP can reimburse. ProfitGuard Plus reimburses real 213(d) care, like telehealth, mental health support, care navigation, and chronic condition support. Step counts, gym memberships, and gift cards are not 213(d) care, which is why programs that reimbursed them failed.
Read the statute textHow they fit together
Think of it as a path the dollars take.
- Section 125 opens the door. The employee makes a pre-tax election from gross wages.
- Section 106(a) lets the employer's health dollars flow pre-tax on top of that election.
- Section 105 and Reg 1.105-11 run the reimbursement through the SIMRP, tax-free, and on its own. Never back through the cafeteria plan.
- Section 213(d) decides what gets reimbursed: real medical care.
Gross pay never changes. The employer's FICA bill drops by about $500 to $600 per employee per year. Each participating employee takes home about $40 to $80 more per paycheck. The order matters, and step three is the one that separates a compliant plan from the ones that got shut down. That is its own page: Is it legal? The double-dipping line.
Who checks the work
Plan documents are written and reviewed by CPAs and ERISA attorneys before any plan goes live. Your own CPA should read them too. We work alongside your CPA, and this page is meant to make that conversation shorter. For the rest of the picture, head back to the ProfitGuard Plus Education Center or the ProfitGuard Plus page.
Frequently asked questions
What tax code is ProfitGuard Plus based on?
Four sections of the Internal Revenue Code: Section 125 (the cafeteria plan), Section 106(a) (employer health contributions), Section 105 with Treasury Reg 1.105-11 (the Self-Insured Medical Reimbursement Plan, or SIMRP), and Section 213(d) (the definition of medical care).
Is this a loophole?
No. All four sections have been on the books for years and are used by ordinary employer benefit plans every day. ProfitGuard Plus puts them together in a specific order, with the reimbursement kept outside the cafeteria plan.
What does the SIMRP do?
A Self-Insured Medical Reimbursement Plan reimburses employees for real medical care tax-free under Section 105 and Treasury Reg 1.105-11. In ProfitGuard Plus, that reimbursement runs through the SIMRP on its own, never back through the Section 125 cafeteria plan.
Why does Section 213(d) matter so much?
Because it draws the line between real medical care and everything else. Programs that reimbursed step counts, gym memberships, or gift cards were reimbursing things that are not 213(d) medical care, and IRS Chief Counsel memos targeted exactly that pattern. ProfitGuard Plus reimburses 213(d)-qualified care only.
Where can I read the actual statutes?
The full text of Title 26 is public. Cornell Law School's Legal Information Institute hosts it, and each section on this page links straight to its text. Your CPA can walk through it with you.
This is education, not tax or legal advice. Actual savings vary by payroll structure, participation, and state and local tax. Talk to your CPA about your specifics before you decide. ProfitGuard Plus is a marketing name for a structure built on IRS code sections 125, 106(a), 105, and 213(d).
See your ProfitGuard Plus number
Enter your W-2 headcount and see the combined value first. Then we'll run your exact numbers. You can also read the full walkthrough on the ProfitGuard Plus page or call +1 (586) 899-1003.
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