Basic Discrim. Testing Question

[Guest akwallace]

I have been asked a question that I have never come across before that is very basic.

Does a company have to actually perform the discrim. testing for the FSA plan?

Or is it allowable to not do the actual calculations, based on some preliminary figures that would indicate that the tests would be passed?

[SLuskin]

We don't perform the calculations if the test would pass by default. For example, in an S corp, where the only hce are the shareholders and family members, they can't even participate in the plan. So the key percentage is zero, and the hce's contribution is also zero. A number of our clients are small companies like that. For the rest of them, we do the numbers.