A medical FSA is a "medical reimbursement plan" that is a "flexible spending arrangement." EXAMPLE: A cafeteria plan permits participants to elect coverage under a medical reimbursement plan with an annual limit of up to $1,200, and to pay for that coverage with pre-tax salary reduction dollars. The plan reimburses employees for medical and dental expenses not otherwise reimbursed by the employers' group health plan (e.g., copays, deductibles, eyeglasses, orthodontia). A participant who elects the maximum $1,200 of coverage must reduce her annual taxable wages by $1,200 (her annual premium) to pay for the coverage. This medical reimbursement plan is a flexible spending arrangement. The maximum amount of reimbursement available for a plan year ($1,200) is equal to 100% of the annual premium ($1,200), which is far less than the 500% threshold contained in Q/A-7(c) of Proposed Treas. Reg. 1.125-2 (1989).