Excluding Keys from POP portion of a Plan

[Guest cshade]

I was reading in the EBIA manual under the Non-Disc rules on page 1730 regarding the Key tests. The last paragraph of this page states:

'We believe that Keys may likewise be excluded from the premium payment portion of a cafeteria plan and have their health insurance coverage paid outside the cafeteria plan (i.e., paid by the Key on an after-tax basis or paid in full by the employer if the employer’s health plan is not subject to the Code § 105(h)(2) nondiscrimination requirements), while still being allowed to participate in other benefits offered under the cafeteria plan (e.g., a DCAP).'

Am I understanding this to mean that Keys can be excluded from POP, but participate in other components, in the case of my group, FSA? My group's plan passes all areas except for the Key test and I'm trying to find an alternative for them. If anyone who utilizes the EBIA manual has any thoughts on this I would appreciate any feedback.