Nondiscrimination Testing

[DTH]

I have a fully-funded health plan that covers NCEs, Key-EEs, and NHCEs. There are no employee contributions made to this health plan. Going forward new employees will need to pay for a portion of the premium with pre-tax dollars through a cafeteria plan.

Are we subject to nondiscrimination testing? I assume yes. If we limit the cafeteria plan to just NHCEs are we subject to nondiscrimination testing?

Thanks.

[Ron Snyder]

If "fully funded" means self-funded, you are subject to discrimination testing under Section 105(h) of the Internal Revenue Code, and Section 1.105-10 of the Regulations. Employee contributions do not trigger the need for testing; the need arose when benefits became self-funded.