Jump to content

Failed "55% DCAP" test


Belgarath
 Share

Recommended Posts

So, IN January of 2018, someone sends 2017 data and asks you to do DCAP testing. They pass the "5% owner" test, but fail the "55% DCAP test."

Lets us just suppose that the HC average benefit amount was $1,000, and the NHC average was $300.

I'm being told that as long as it is "corrected" by the time the W-2's are done, that instead of the entire HC amount being considered taxable income, you can just count the excess over what "would" have passed.

So, for example with a $300 NHC average, if the HC average had been $545 (I'm rounding here) then it "would" have passed, and therefore the HC taxation on the DCAP will only be amounts in excess of $545.

Is this approach "blessed" anywhere in IRS guidance? I don't find it anywhere, but I'm not a cafeteria plan expert. Do people just do it this way, even if not officially sanctioned by the IRS?

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...