Is It Time to Perform Non-Discrimination Testing? Here’s What You Need to Know
March 27, 2019
Pre-tax benefit plans give you and your employees an opportunity to save money. And with that opportunity comes oversight, because the federal government requires you to provide these tax breaks in a way that’s fair for everyone.
That’s why you’re required to perform non-discrimination testing for any plans you offer that are governed by Code Section 125, along with Health Reimbursement Arrangements (HRAs) and Self-Insured Medical Plans (SIMPs). Keep reading to find out what you need to know when performing this important testing. And complete the form below to get your free resources and learn how innovative technology can simplify the administration of your plans.
What does the IRS expect from my plans?
Before testing, you should understand what the goal is. Non-discrimination testing will determine whether there is any discrimination in your benefits offerings between your highly compensated employees and key employees and other employees at your company.
When should I perform non-discrimination testing?
We recommend that, as an employer, you test at least twice per plan year, once at the beginning or the middle of the plan year and again prior to the end of the plan year. The first is to determine if the plan is in compliance, and the second helps ensure the plan has stayed in compliance. Once a plan year ends, adjustments to salary reductions can no longer be made.
We offer Discovery Tests™ as our easy-to-use application for non-discrimination testing. Discovery Tests™, which you can access directly from your LEAP™ by Discovery Benefits account, lets you:
- Access immediate results through download, online reports.
- Obtain historical reports for past tests.
- Save time and money when using an administrator that already has access to your employee data.
Who should be responsible for completing the testing template at my business?
Anyone you choose to give access to your payroll information can complete the template. You should consider that:
- An individual must be given the role of “compliance” within our system to be able to access our testing software.
- The testing template is filled with HIPAA information, so you’ll want to choose someone you’re comfortable viewing your employees’ personal information.
How long does it take?
Testing can be completed and you can get results in a matter of minutes once you upload the completed template.
How do I know which testing option to use?
We offer six testing options. You’re encouraged to review your testing guide to ensure you’re completing the appropriate template based on the plans offered.
What happens when a failure occurs?
If the Results report advises you of a failed result, the recommendation section found at the end of the Results report will provide necessary steps to bring your plans into a passing status. We encourage employers to work with their own benefits counsel, such as a tax adviser or benefits attorney, to make sure their plans meet IRS specifications.
What do I do after I’ve passed testing?
We do recommend that you keep a copy of your testing results and your template for your files.
Would you like to learn more about simplifying your administration with technology? Complete the form above to get your free resources.