If your company allows employees to pay their benefit contributions on a pretax basis, the IRS requires you to conduct an annual non-discrimination test. The purpose of the test is to determine whether the benefits provided to highly compensated employees comply with the IRS regulations governing pretax contributions. There are a number of non-discrimination tests and there are different testing requirements for different types of plans. There are safe harbors for certain types of plans as well. 

Failing these tests will cause the benefits that are deemed as discriminatory to be included in the taxable compensation of highly compensated employees, which will also cause the employer to pay Social Security and Medicare taxes on the deduction amounts. 

Best practices for testing include testing near the beginning of the plan year(shortly after open enrollment concludes) to determine if there are any issues and to provide sufficient time to correct them. ​
​We do not limit clients to one test per plan year; we will perform as many as are needed to bring your plan into compliance, at no additional charge.

Welfare Benefit Plans That Require Non-Discrimination Testing

Self-insured Health, Dental, and Vision Plans
Section 125 Cafeteria Plans
​Health Savings Accounts (when contributions are made via a Section 125 Plan)
Health FSA Plans
Dependent Care FSA Plans
Health Reimbursement Arrangements (HRA Plans)
Group Term Life Insurance Plans
Educational Assistance Plans
Adoption Assistance Plans

For more information on Non-Discrimination Testing,
​click here to be in touch with our consultants​