When To Complete Non-Discrimination Testing?

Non-Discrimination Testing makes sure there isn’t discrimination between highly compensated employees/key employees and other employees at a company.  With the BASE® NDT, this test takes out the guesswork and demonstrates fairness with respect to eligibility, contributions, or benefits to all employees, keeping the health benefit plans fair for everyone.   

Not only does the IRS suggest doing Non-Discrimination Testing (NDT), but they require it.  It is important to perform the test if employers provide health benefits to their employees.  All employers, regardless of business type or size, are required to perform these tests on their health benefit plans. 

NDT is for all employers who offer health and welfare benefits to their employees and who want to ensure they follow all regulations to maintain their tax-favored status.

When should a business complete a test?  Non-Discrimination Testing should be performed by the last day of the current plan year and include all employees who were employed on any day during that plan year, which for many employers means testing takes place during the 4th quarter of the year.  It is recommended that employers test once early in the plan year or in the middle of the plan year.  This mid-year testing helps determine if any additional steps should be taken to ensure that the employer passes the test by the end of the plan year. 

Testing is required annually, and while the tests focus on participation levels across all employee types within an organization, multiple factors can play a role in that participation and whether a company passes or fails the nondiscrimination test.  Due to the complexity testing presents, employers look to BASE® to help them ensure compliance in handling their Section 125 (includes Flexible Spending Account), Health Reimbursement Arrangement (HRA), and self-insured medical plan (SIMP) Non-Discrimination Testing. Contact BASE® for more information at 888.386.9680.

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