\n Federal rules prohibit cafeteria plans (aka \"POP plans\") from providing offering\n benefits in a manner that discriminates in favor of highly-compensated employees\n (often called \"HCEs\") or provides more than 25% of the total benefits under the\n plan to so-called \"Key Employees\" (often just called \"Keys\").
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\n The purpose of these rules is to ensure that employees at all levels enjoy the benefits\n offered through an employer's cafeteria plan, rather than just managers, executives\n and other upper-tier employees.\n
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\n A Highly Compensated Employee (
HCE) is any of the following:
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\n - An officer of the employer or
\n - \n A person owning more than 5% of the employer entity at any point during the current\n or preceding plan year or\n
\n - {{ hce }}
\n - A spouse or tax dependent of any of the above individuals, who is also employed by the company
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\n\n\n A
Key Employee is any of the following:\n
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\n - {{ keyEmployee }}
\n - A person with ownership of more-than-5% of the employer entity* or
\n - \n A person with ownership of more than 1% of the employer entity* with an annual compensation\n over $150,000.\n
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\n *Please note that certain \"ownership attribution\" rules apply for determining business\n ownership with regard to family members. Generally, an individual is deemed to own\n the interest held by his or her spouse (other than one who is legally separated),\n children, grandchildren, and parents.\n \n
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\n There are three basic components to the testing of cafeteria plans.
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\n The
Eligibility Test determines whether the plan is broadly offered\n to non-HCEs along with HCEs. In general, all employees of the plan sponsor and any\n other business that is a member of a related group of businesses must be included\n in the testing group for the Eligibility Test. If you are able to answer \"yes\" to all\n questions on this portion of the test, your plan automatically passes the non-descrimination\n test; you will not be prompted to answer any further questions.
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\n The
Contributions and Benefits Test determines whether plan benefits\n are available to non-HCEs on the same or similar terms as HCEs. All employees who\n are eligible to participate in the plan should be included for this test.\n
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\n As its name implies, the
Key Employee Concentration Test has to\n do with Key Employees rather than HCEs. This test determines whether such Key Employees\n receive more than 25% of the total benefits under the plan. For this test, only\n plan participants who have elected nontaxable benefits are including in the testing\n group.\n
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\n Before going further, please make sure that you have the following items and other\n pieces of information available. All of the following will be necessary for completion\n of the discrimination testing regimen:
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\n - Your existing plan document.
\n - The number of non-HCEs eligible to participate in the cafeteria plan.
\n - Total number of non-HCEs
\n - Number of HCEs eligible to participate in the cafeteria plan.
\n - Total number of HCEs
\n - \n Total dollar amount of pre-tax premiums (paid by both the employer AND the employee) for ALL employees\n participating in the cafeteria plan\n
\n - \n Total dollar amount of pre-tax premiums (paid by both the employer AND the employee) for Key Employees\n participating in the cafeteria plan\n
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\n If you need help, please view our Non-Discrimination Testing walkthrough video
HERE\n
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