Discrimination Testing

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Discrimination testing, simplified.

One of the major perks associated with flexible spending accounts (FSA), dependent care accounts (DCA), and health reimbursement accounts (HRA) is the substantial tax savings employers and their employees experience.

These types of accounts allow employees to contribute a certain amount of their gross income, before taxes are taken, in exchange for employer-sponsored benefit plans.

Because of the tax-saving nature of these types of plans, the IRS wants to make sure that an employer’s plan does not favor company officers, owners, or other “highly-compensated” or “key” employees. This requirement is fulfilled through discrimination testing.

A must-have compliance resource for employers.

Our easy-to-use, self-service testing tool allows employers to test their plans for any sign of discrimination in a matter of minutes. The best part? Ameriflex clients get complimentary, unlimited access to our discrimination testing tool, allowing for frequent and convenient testing throughout the plan year.

What is a “highly-compensated” employee?

Highly-compensated employees include:

  • Company officers
  • Employees who own more than five percent of the voting stock or value of all classes of stock of the employers
  • Employees with an annual salary of $120,000 or more
  • Spouses or dependents of any of the foregoing

What is a "key" employee?

Key employees include:

  • Officers who make over $175,000 annually
  • Employees who own more than 5% of the company
  • Employees who own more than 1% of the company and have an annual salary in excess of $150,000

How do I know if my plan is nondiscriminatory?

This chart details which tests your plan must pass in order to be considered nondiscriminatory — all of which are included with our discrimination testing tool.

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