Faldo, Inc., provides medical coverage to employees through a self-insured plan. Nick, the president of Faldo, receives $3,400 in medical expense reimbursements from the plan during the current year. Discuss the tax consequences to Nick under the following circumstances:
a. All employees are fully covered by the plan.
b. All employees are covered by the plan. However, only Faldo's executive officers are fully reimbursed for all expenses. All other employees are limited to a maximum reimbursement of $1,000 per year.