Discrimination Testing

[Guest Carol Glass]

question: We have a group that has 4 Flexible Spending account participants in it. (1 employee has Dep. Care & a Medical Acct. & the other 3 participants have Medical Accounts.All are clearly non-highly comp employees. There are no officers or Keys participating.Only these 4 employees.Do we still have to do a discrimination testing for 4 people who are clearly not highly comp? Is there a min./max. # of participants to do a testing? Please advise. Thank you.

email: cglass@bcbsde.com

[Bob R]

The direct answer is there is no minimum level of participation that is required.

But, the long answer as to whether you need to perform any tests for the plan in question depends. You indicated who is benefiting in the plan. For the tests that are based on utilization (such as the 25% and 50% test for dependent care), you don't need to perform any tests.

But, there are nondiscrimination tests that are based on eligibility for coverage. For these tests, you have to look at who was offered the coverage and not who utilized it. So, if the only people who are even eligible to participate in the plan are key employees and NHCEs (and the class of people who are eligible is considered to be a resonable classification), then you'd automatically pass the nondiscriminatory eligibility tests. In that case, you wouldn't need to run any nondiscrimination tests on the plan at all.