Test results in 48-hours*!
Starting @ $288/yr.
The administration of employee benefit plans is an important HR responsibility fraught with legal complexities. Among these plans, cafeteria plans stand out for their flexibility, yet they require careful oversight to ensure compliance with Internal Revenue Service (IRS) nondiscrimination rules.
Nondiscrimination testing is an important, yet often overlooked, aspect of administering cafeteria plans. Performing testing is critical for avoiding severe penalties and legal liabilities. These tests ascertain whether the benefits offered through the cafeteria plan disproportionately favor highly compensated employees (HCEs) over non-highly compensated employees (NHCEs). Failure to adhere to nondiscrimination regulations can lead to substantial penalties, IRS audits, and even legal action against the employer.
The foremost reason for conducting nondiscrimination testing on cafeteria plans is to meet the IRS's stringent requirements. The IRS mandates that cafeteria plans must satisfy specific nondiscrimination standards to maintain their tax-favored status. Violating these requirements can result in the disqualification of the plan, subjecting both the employer and employees to adverse tax consequences.
Nondiscrimination testing also helps employers fulfill their legal obligations to ensure equal treatment of employees. By actively monitoring benefit distribution and addressing any disparities, employers demonstrate their commitment to fairness and compliance with anti-discrimination laws. Neglecting these responsibilities not only exposes the organization to legal risks while damaging its reputation and employee trust.
In conclusion, performing nondiscrimination testing on cafeteria plans is not just a best practice but a legal necessity for HR professionals. By ensuring compliance with IRS regulations, HR professionals mitigate the risk of penalties, audits, and legal liabilities. For information about BAS’ nondiscrimination testing services, contact your account manager or email solutions@basusa.com.
*Timing dependent on receipt of complete information in BAS-required format and other factors determined at implementation
Benefit Allocation Systems (BAS) provides best-in-class, online solutions for: Employee Benefits Enrollment; COBRA; Flexible Spending Accounts (FSAs); Health Reimbursement Accounts (HRAs); Leave of Absence Premium Billing (LOA); Affordable Care Act Record Keeping, Compliance & IRS Reporting (ACA); Group Insurance Premium Billing; Property & Casualty Premium Billing; and Payroll Integration.
MyEnroll360 can Integrate with any insurance carrier for enrollment eligibility management (e.g., Blue Cross, Blue Shield, Aetna, United Health Care, Kaiser, CIGNA and many others), and integrate with any payroll system for enrollment deduction management (e.g., Workday, ADP, Paylocity, PayCor, UKG, and many others).
