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Flashcards in Nondiscrimination Testing Deck (7)
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1

What are the three general tests for cafeteria plans

1. An eligibility test
2. A contributions and benefits test
3. The key employee concentration test

2

The plan may not discriminate in favor of highly compensated individuals as to the ability to participate

Eligibility test

3

The plan must make contributions and benefits available on a nondiscriminatory basis, and the plan fails the test if highly compensated individuals select more nontaxable benefits than non highly compensated individuals select

Contributions and benefits test

4

The plan's key employee contributions cannot exceed 25% of the total contributions into the plan

The key employee concentration test

5

What is part one of the eligibility test

No employee be required to complete more than three years of employment as a condition of eligibility and all employees be subject to a uniform eligibility requirement

6

What is part two of the eligibility test

facts and circumstances determination. The cafeteria plan may not discriminate in favor of highly compensated individuals.

7

What does a highly compensated individual mean

5% owner
A highly paid person
A spouse or dependent of an employee meeting one of these criteria