Non-Discrimination Tests
Employers offering employee benefit plans may not discriminate in favor of highly compensated employees (HCEs) and key employees with respect to eligibility, contributions, or benefits.
What is Non-Discrimination Testing (NDT)?
The purpose of non-discrimination testing is to ensure that plans are non-discriminatory in eligibility and participation, and the highly compensated employees (HCE) are not participating to a higher degree than the non-highly compensated employees (NHCE).
Key Solution Features
Who must complete testing?
If you have a Flexible Spending Account (FSA), Premium Only Plan (POP), Health Reimbursement Account (HRA), or a self-funded health plan 105(h), the IRS requires you to conduct non-discrimination testing once a year.
What happens if you don’t comply?
Non-discrimination testing is vitally important to plan compliance. If your organization does not adequately follow all the steps necessary for non-discrimination testing, or you fall out of compliance with federally mandated regulations while using these plans, all discriminatory benefits are included in the gross pay of highly compensated employees. This also means that employers can no longer take advantage of the 7.65% tax break on their annual employer matching FICA tax.