Tests for Cafe Plans

[Guest TPAStacey]

I am trying to help a client determine if they can offer purchasing PTO as a benefit under the cafeteria plan if they don't offer this benefit to both divisions of their company. Again, they only want to offer purchasing PTO as a benefit for one division. It is important to note that there is only 1 HCE/KEY employee in the division that they want to offer this benefit to and he will not be using the "purchased PTO".

From what I can see there are really three tests a cafe plan needs to satisfy: (1) concentration test; (2) nondiscrimination test; and (3) eligibility test. There should be no issue with test (1) or (2) because there will be no HCE or Key employees utilizing this benefit. I'm just not sure how the eligibility test fits in.

Can anyone shed some light on the eligibility test or any other tests I should be concerned with?