The first situation occurs when a benefit is available to a highly compensated individual but not to all other participants, or if the benefit otherwise discriminates in favor of highly compensated individuals. In this case, the total amount reimbursed under the plan to the employee with respect to that benefit is an excess reimbursement.
The second situation occurs when a plan discriminates as to participation, even though all benefits are available to all other participants and are not otherwise discriminatory. If this is the case, the excess reimbursement is determined by multiplying the total amount reimbursed to the highly compensated individual for the plan year by a fraction. The numerator of this fraction is the total amount reimbursed to all participants who are highly compensated individuals under the plan for the plan year and the denominator is the total amount reimbursed to all employees under the plan for such plan year. In determining the fraction, any reimbursement attributable to a benefit not available to all other participants is not taken into account.2
Multiple plans may be designated as a single plan for purposes of satisfying nondiscrimination requirements. If an employee elects to participate in an optional HMO offered by the plan, that employee is considered benefited by the plan only if the employer’s contributions with respect to the employee are at least equal to what would have been made to the self-insured plan and the HMO is designated, with the self-insured plan, as a single plan.