IRC 105 plans

[Guest RS Vatalaro]

Situation #1: C-Corp has only one "employee" who is also the 100% shareholder. Since a 105 plan has to benefit "employees," can sole shareholder set up a 105 plan in which he pays all his uninsured medical expenses thru the 105 plan and the corporation takes the deduction? My question is, is the sole shareholder an employee for purposes of IRC 105 even though he does not take a salary.

Situation #2: Same company, same sole shareholder. I know there is a discrimination test under IRC 125 regarding key employees. I have been told that there is no exception for corporations where the only employees are also key. E.G. the discrimination test would automatically fail, so this type of company cannot have a 125 plan. I have done a lot of reading and cannot find anything definitive that says a 105 plan will automatically fail its discrimination test if all employees also happen to be key/HCE. In the case of my sole shareholder "employee" the test would automatically fail. 401k plans have a caveat that a company of only HCE's and no NHCE's will NOT automatically fail the ADP test. What about 105 plans?

Situation #3: From the reading I have done, it does not appear that a 105 plan has any IRS notification requirement upon installation (e.g. you don't have to notify the IRS that you have installed a 105 plan). Is this true?

Any help would be appreciated, thank you.