If your broker told you to get this done, here's what you need to know and how to get it handled quickly.
Plans from $250 · Quick turnaround · Corrective guidance included
If your company runs pre-tax benefits through a cafeteria plan the IRS requires annual testing to make sure the plan isn't unfairly stacked in favor of your highest-paid people.
It's not optional, and it's not something your payroll provider is doing behind the scenes. It's a separate compliance requirement that most employers either don't know about or assume is handled when it isn't.
Your broker is right that you need testing, but don't stress. You fill out our form, we do the work.
Testing runs on the last day of your plan year. By that point it's too late to course-correct any mistakes. The window to fix any problems closes permanently for that year.
Test results stay on file with you as the employer. They are not submitted to the IRS and are only needed if the IRS audits your plan.
A failed test doesn't disqualify the whole plan. It strips pre-tax status from your highest-paid people specifically, costing you unnecessary financial loss.
Nondiscrimination testing is a gap in most employer benefit programs. Most employers do not know it. If you manage a book of clients with cafeteria plans, we can work with you directly to keep your groups compliant. Contact us to discuss how we support broker relationships.
Every Section 125 cafeteria plan has required annual nondiscrimination tests. When a plan quietly drifts out of compliance, nobody gets a warning. The bill just shows up later. Here is where the risk lives and how we take it off your plate.
If your highest earners or owners are getting more out of the plan than everyone else, the IRS has a problem with it. The trouble is you usually cannot see it coming from the inside, and by the time you can, the damage is already done. We run the checks that catch it, flag anything off, and hand you a clean result you can actually rely on.
Applies to every cafeteria planA health FSA looks simple right up until it isn't. The way people enroll and the way the benefit is set up can both quietly tip a plan out of bounds, and a failure here lands squarely on the people you most wanted to take care of. We pressure-test it from both angles so a surprise does not turn into a tax headache.
Applies if you offer a Health FSADependent care benefits are held to their own stricter standard, and it trips up more employers than any other part of the plan. Plenty of companies assume they are fine and find out otherwise the hard way. We handle the comparison the IRS actually cares about and tell you where you stand before it becomes your problem.
Applies if you offer a Dependent Care FSAA note on payroll providers: A lot of employers assume their payroll company or benefits platform is quietly handling this. Most are not. Running a plan and testing a plan are two different jobs, and the testing is the one that gets skipped. Ask us to check and we will tell you straight what has been done and what hasn't.
Pick your plan type, pick your timing. Price is determined by which tests apply to your plan and how many runs you need.
Every engagement includes corrective action guidance. Not sure which row applies? Contact us first and we will confirm before you pay anything.
A Premium Only Plan with no spending accounts uses the first row. If you offer a Health FSA or a Dependent Care FSA but not both, use the second. If you offer both, use the third.
When does testing need to happen?
Testing is required as of the last day of the plan year. In practice, you want results several months before that deadline so there is still time to act on anything that needs to be corrected. Once the year closes, the window to fix problems closes with it.
Does the IRS receive these results?
No. Nondiscrimination test results are retained by the employer as internal compliance documentation. They are never filed with the IRS. If your plan is ever audited, the records need to be available. We retain documentation on your behalf so it is there when you need it.
What happens if our plan fails a test?
A failed test affects only the employees the law identifies as highly compensated. The rest of your workforce is unaffected. That said, the financial and administrative consequences for the affected employees and the employer can be significant, which is why catching a problem early matters so much.
How many tests does our plan need?
That depends on which benefits your plan offers. A basic premium-only plan has a smaller set of required tests than a plan that also includes spending accounts. When you submit your information, we identify which tests apply to your specific plan and run only those.
What data do you need from us?
We need a census of everyone who worked during the plan year, including employees who left mid-year. For each person, we need salary information, benefit elections, and a few data points about their role in the company. We provide a template, and most employers can complete it in under an hour.
Who counts as a highly compensated employee?
The IRS definition includes officers, shareholders with significant ownership stakes, employees above a certain compensation level, and their spouses and dependents. The specifics matter. The definition is more inclusive than most employers realize, which is why the analysis needs to be done carefully.
Our payroll provider said we are covered. Should we still test?
This is one of the most common sources of false confidence in this area. Administering a plan and testing a plan are two different things. Most payroll and benefits platforms do not perform nondiscrimination testing as part of their service. Ask your provider specifically whether they ran the tests and can provide documentation. In most cases, they did not.
Can S-Corporation owners participate in the plan?
Shareholders above a certain ownership threshold in an S-Corporation are treated differently under the tax code and are generally not eligible to participate in the company's cafeteria plan in the same way as other employees. This is a common gap that we flag during testing when ownership data is submitted.
Send us a message and we'll get back to you quickly with the census template and next steps. No commitment, no pressure.
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