Plans which discriminate in favor of highly compensated employees will cause the benefit to be included (at least partially) in the employee's taxable income. To avoid being discriminatory as to who may participate, a plan must:
A. Benefit 70% or more of all employees.
B. Cover 80% of eligible employees where 70% or more of the employees are eligible.
C. Cover a special classification of employees which the IRS determines not to be discriminatory.
To avoid being discriminatory in actual operation, highly compensated employees must not have greater benefits than the other employees. For example, benefits should not be a percentage of salary.
Medical Reimbursement Plans
Highly Compensated Employees
Uninsured or Insured
This document was last modified on July 26, 1999
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