Employer sponsors a self-insured medical reimbursement plan under Code Section 105(h). Coordination of benefits provision states that the plan is primary to an employee's auto insurance coverage. Proposal is to amend the plan to make it secondary to auto insurance effective 1/1/05 for all new hires. Effective 1/1/06, the plan will be amended to make it secondary to auto insurance for all other participants.

Concern is that for 2005 this proposal would create a discriminatory benefit under Section 105(h)(2)(B).

Has anyone ever looked at whether a coordination of benefits provision of a self-insured medical reimbursement plan is a "benefit" under 105(h)?

How do you do or How do you sponsor a plan under 105(h)?

Section 105(h)(2)(B) deals with discrimination in plans, there are no benefits under this section.

COB is intended to "total" the benefits received under 1 or more plans so as to try and prevent reimbursements from exceeding costs. Excess reimbursements might constitute taxable income. The benefits under each separate plan is subject to the terms and conditions etc of the plan providing that benefit. That plan must meet the discrimination requirements of section 105(h).

COB provides no benefits and has no discrimination testing etc under 105(h).

Thanks, GBurns. That follows my thinking that the COB provision is not, itself, a benefit, rather it is a method of prioritizing payments when the same benefit or expense is covered by more than one plan.

Any other thoughts? Has anyone had occasion to address this with the IRS?

Thanks.