25% Test

[Guest Neno]

In our company, employer pays the equivalent of single health coverage. If an employee elects family coverage they pay the difference and can run the premiums through the cafeteria plan. Am I correct in that only the difference (between single and family) for which the employee must pay is included in the 25% test?

Also, the company also provides a flat credit of $20 per month per employee for the Health FSA. Am I correct in including this amount in the 25% test as well?

I am trying to determine what the owners can put in for this year and just need to know that answer to this.

Thanks for any help you can provide. Eventually I'll sort this out.

[papogi]

The only dollars to include in the 25% test are dollars which are going through the 125 plan, and those can be decsribed as any dollar for which there was a cash option. For instance, pre-tax payroll deductions and flex credits for which there was a cash option are all dollars which should be included in the 25% test. The automatic employer-provided siingle coverage should not be included, as long as an employee cannot opt-out of the single coverage and receive cash. The same rule applies to the flat $20 credit towards the FSA. If there’s no cash option, the dollars are not to be included in the test.