HCE only MERP

[J2D2]

A recent thread on the Cafeteria Plans board noted the informal IRS position that an employer whose only employees were HCEs could not have a cafeteria plan because it would fail the non discrimination test. Has anyone considered whether the same reasoning might apply in the case of a self-insured medical expense reimbursement plan or MERP?

IRC Section 105(h) and the underlying regs seem to require a non discrimination analysis based on the terms of the MERP, rather than an operational test. The BNA Tax Management Portfolio #389 also takes this approach, stating that "Discrimination is determined by reference to benefits available under the plan, not to amounts actually paid." However, after another review of the regs, I'm not so sure.

In our case we have an employer with only HCEs and a MERP that, by its terms, provides the same benefits to all participants and has the same eligibility requirements for all employees. Obviously, I'd like for BNA to be correct. Any thoughts?

Thanks.