Welcome to the Spending Account Service Center’s Self-service Nondiscrimination Testing Portal
Because cafeteria plans enjoy favorable tax treatment under the IRS code, non-discrimination rules are required to prevent plans from discriminating in favor of individuals who are either highly compensated or key to the business.
What is an HCE?
An HCE is a Highly Compensated Employee defined as:
- an officer at any time during the preceding year or the current year in the case of an individual’s first year of employment
- a shareholder owning more than 5% of the voting power or value of all classes of stock of the employer during the current or preceding year
- an employee who earns more than the Code §414(q) compensation threshold for the prior plan year or the current year in the case of an individual’s first year of employment($130,000 in 2020 W2 wages for 2021 plan year testing)
- a spouse or tax dependent of an individual described above.
What is a Key Employee?
A Key Employee is defined as:
- an officer of the company with annual compensation greater than a specified dollar threshold ($185,000 for 2020).
- a shareholder owning more than 5% of the voting power or value of all classes of stock. (When making this determination please note that a spouse or dependent of an owner of the company is considered to own the same percentage as the owner).
- a shareholder owning more than 1% of the voting power or value of all classes of stock with compensation over $185,000.
Test Descriptions
There are three basic components to the nondiscrimination test:
- Premium Conversion (Section 125)
- Healthcare Spending Account (Section 105)
- Dependent Care Spending Account (Section 129)
Test Preparation
There are three basic components to the nondiscrimination test:
- Premium Conversion (Section 125)
- Healthcare Spending Account (Section 105)
- Dependent Care Spending Account (Section 129)