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Will I need to perform Non-Discrimination testing?

Written by Aimee Reynard
Updated 5 months ago

Yes, Non-Discrimination testing is required by the IRS for all benefits pre-tax benefit plans. Unlike Form 5500 filing, there are no exceptions with regards to the Non- Discrimination testing requirement.

Please note, our Non-Discrimination testing portal will not store or shore any test results. You are free to run the test as many times as needed. The IRS requires that the testing be run at the end of each plan year, but we recommend running this testing multiple times each year to ensure that your plan remains compliant with IRS regulations.

Section 125 or Cafeteria Plans enjoy favorable tax treatment under the IRS code. Because of this, Non-Discrimination rules were put in place to prevent plans from discriminating in favor of individuals who are either highly compensated or key to the business. In short, the testing is in place to ensure that all employees are being treated fairly (with regards to the pre-tax benefits) regardless of position.

Your Non-Discrimination testing results should be kept on file with your signed Plan Documents. You do not need to submit the Non-Discrimination test results to the IRS with your taxes. In the event of an IRS audit, you will be asked to present these results to verify that the testing has been performed and passed.

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