BASE® Non-Discrimination Testing (NDT)
BASE® Non-Discrimination Testing (NDT) takes out the guesswork as an employer determines if there is discrimination between highly compensated employees/key employees and other employees at a company. These tests demonstrate fairness with respect to eligibility, contributions, or benefits to all employees. Non-Discrimination Testing is a requirement of the IRS Code and is for all employers who offer health and welfare benefits to their employees who want technical assistance to comply with all regulations to maintain their tax-favored laws.
Non-Discrimination Testing is not a choice, and it can prove to be confusing and challenging. With BASE®, employers can assess compliance on their Premium Only Plans, Section 125 Cafeteria Plans, and Self-Funded Arrangements (Section 105(h)).
Benefit to Employer:Compliance.
The IRS requires annual non-discrimination testing that assesses whether an employer’s plans are in full compliance.
Supporting employee benefit compliance to fairly offer benefits across all levels of employees.
Maintain the plans tax-advantage status.
Benefit to Employee:Fair.
With this required testing, employees across the board can receive assurance that they are receiving fair and equal benefits.
Non-Discrimination Testing Eligibility
The BASE® Non-Discrimination Testing is for any employer that sponsors a Health Reimbursement Arrangement and/or 125 Cafeteria Plan and satisfies the intricacies of testing by meeting the requirements of the proper testing to be performed, including:
- Who are the highly compensated and key employees for each specific test
- Who should be included in each specific test
- Which employees are allowed to be excluded from each specific test
Frequently Asked Questions
Certain plans receive favorable tax treatment, so non-discrimination rules exist to prevent plans from being designed in such a way that it discriminates in favor of individuals who are either highly compensated employees (HCE) or are otherwise key employees (KEY) in the organization.
If the employer sponsors an HRA and/or 125 Cafeteria Plan, they could be eligible for Non-Discrimination Testing.
NO exceptions! Even government entities, churches, and tax-exempt employers are subject to Non-Discrimination rules. Every employer is required to be in compliance with the regulations. The only way to determine if the plan is compliant is to run the test.
The benefits that fail the Non-Discrimination tests may be included in gross income when they would have been nontaxable if the plan benefit had passed the test. Note, the entire plan does not fail for all participants just because it is found discriminatory. Employees who are not in the prohibited group can still exclude the benefits from income.