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Flashcards in Nondiscrimination Testing Deck (7)
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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


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

Eligibility test


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


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

The key employee concentration test


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


What is part two of the eligibility test

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


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