The nondiscrimination rules applicable to medical reimbursement by an employer (IRC sec 105(h)) apply to self-insured medical reimbursement plans. Treas Reg sec 1.105-11(b)(1)(i) defines that to be
QUOTE
A self-insured medical reimbursement plan is a separate written plan for the benefit of employees which provides for reimbursement of employee medical expenses referred to in section 105(b). A plan or arrangement is self-insured unless reimbursement is provided under an individual or group policy of accident or health insurance issued by a licensed insurance company or under an arrangement in the nature of a prepaid health care plan that is regulated under federal or state law in a manner similar to the regulation of insurance companies. Thus, for example, a plan of a health maintenance organization, established under the Health Maintenance Organization Act of 1973, would qualify as a prepaid health care plan. In addition, this section applies to a self-insured medical reimbursement plan, determined in accordance with the rules of this section, maintained by an employee organization described in section 501©(9).
From a quick read of the Exec-U-Care brochure, under the heading "Will Employees Pay Taxes on Benefits?" it is provided
QUOTE
When you use Exec-U-Care as the funding vehicle for your medical reimbursement plan, benefits are not taxable to recipients in most situations. This is just one of the advantages of an insured plan over a self-funded plan. Payments under a discriminatory self-insured medical reimbursement plan are taxable, but payments under an insured medical reimbursement plan like Exec-U-Care are generally exempt from taxation.
It's always good to be skeptical and scrutinize a new idea. Here, the use of 'medical reimbursement plan' (albeit right after the word 'insured') instead of simply calling it a specialized, supplemental health insurance policy is what likely brought the discrimination concern to mind.
If it's truly insured--and from my quick read I have no reason to doubt that it is--the Exec-U-Care program would be tax-free to the executive under IRC sec 106(a), for which no nondiscrimination requirement applies.
. I would greatly appreciate any thoughts on this.