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.
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.
What is a “highly-compensated” employee?
Highly-compensated employees include:
What is a "key" employee?
Key employees include:
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.