Qualify For Tax-favored Status

To qualify for tax-favored status, Section 125 Cafeteria Plans and Self-Funded Group Health Plans must not discriminate in favor of certain employees. The IRS created the different nondiscrimination testing rules to prevent employers from providing better benefits to its higher paid or otherwise key employees.

Unfortunately, many employers are unaware of these requirements and fail to complete the annual nondiscrimination testing. Most third-party administrators do not provide this service leaving the employer unknowingly at risk for potential tax liabilities that also affect
the higher paid and key employees.

Nondiscrimination Testing

Should be performed annually at the end of the plan
year and those results kept on file in the event of a plan audit. We also recommend a preliminary test at the beginning of the plan year to allow enough time to make any necessary adjustments and avoid tax issues that can result from waiting to making adjustments at the end of the plan year.

Nondiscrimination testing is complex. Performing the testing correctly requires extensive knowledge to identify what tests are necessary, which employees to include and how to properly run the different tests. Let us take away the guesswork. Our nondiscrimination testing services ensure the employer is compliant and eliminates the risk of losing tax favored status..

REGULATION

Component Tests Required

Section 129 Dependent Care FSA

  • Eligibility Test

  • Contributions & Benefits Test

  • More than 5% Owner Concentration Test

  • 55% Average Benefits Test

Section 125 Cafeteria Plan

  • Eligibility Test

  • Contributions & Benefits Test

  • Key Employee Concentration Test

Section 105(h) for Self-Funded Plans

  • Eligibility Test

  • Benefits Test

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Frequently Asked Questions

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We’re a global consultancy that helps the world’s most ambitious change makers define the future. Across 59 offices in 37 countries, we work alongside our clients as one team with a shared ambition to achieve extraordinary results, outperform the competition and redefine industries.

Lorem Ipsum is simply dummy text of the printing and typesetting industry.?

We’re a global consultancy that helps the world’s most ambitious change makers define the future. Across 59 offices in 37 countries, we work alongside our clients as one team with a shared ambition to achieve extraordinary results, outperform the competition and redefine industries.

Lorem Ipsum is simply dummy text of the printing and typesetting industry.?

We’re a global consultancy that helps the world’s most ambitious change makers define the future. Across 59 offices in 37 countries, we work alongside our clients as one team with a shared ambition to achieve extraordinary results, outperform the competition and redefine industries.