Non Discrimination Testing

Since 1978 (other than during a temporary repeal in 1986), certain employee welfare benefit plans have been subject to the nondiscrimination requirements of Internal Revenue Code (Code). Plans subject to nondiscrimination testing include self-funded group health plans, health flexible spending arrangements and dependent care flexible spending arrangements. Through a series of calculations performed on an employer's demographic data, plans must be tested annually to determine if they favor highly compensated and key employees with respect to eligibility, benefits or utilization. Under discriminatory plans, employers may be subject to fines and penalties and benefits provided to highly compensated employees become taxable.

The Affordable Care Act extended nondiscrimination testing requirements to non-grandfathered fully insured group health plans. Discriminatory plans are subject to an excise tax, civil monetary penalties or civil actions. However, due to a lack of regulatory guidance, the Internal Revenue Services has indicated that non-grandfathered fully insured group health plans do not have to perform nondiscrimination testing until addition guidance is issued.

SBS offers nondiscrimination testing services for the following types of employee welfare benefit plans:

• Cafeteria plans under Code Section 125,
• Self-funded group health plans and health flexible spending arrangements under Code Section 105(h), and
• Dependent care flexible spending arrangements under Code Section 129.

If you are interested in nondiscrimination testing services, please contact us for a proposal.