Small incorporated employer sets up a medical reimbursement plan with an annual reimbursement limit of $2,000 per eligible employee. This is NOT a cafeteria plan; it is funded with employer money.

The plan covers out-of-pocket expenses for medical care for the employee and his or her spouse and dependents.

The sole owner runs the business and works full time and the sole owner's wife is a legitimate employee of the corporation and also works full time. There are unrelated eligible employees as well. It seems to me the husband and wife, collectively, have a limit of $4,000 for expenses for themselves and their dependents, and there is nothing in 105(h) or the regulations under 105(h) to block this.

Anyone disagree?

As a follow-up, it occurred to me that the wife is constructively the "sole owner" too under the Section 318 attribution rules, but I do not believe that creates a discrimination problem simply because she is allowed to participate.