FSA Nondiscrimination FAQs

What is the Dependent Care 5% Owners (Concentration) Test?

The 5% owners test applies only to Dependent Care FSA. Not more than 25% of the plan benefits for dependent care assistance during the year may be provided for shareholders or owners (or their spouses or dependents) who own more than 5% of the stock, the capital, or profits interest in the employer (on any day of the year)

What is the Dependent Care 55% Average Benefits Test?

The Dependent Care 55% Average Benefits Test applies only to the Dependent Care FSA. This test is passed if the average benefit provided to employees who are non-HCEs is at least 55% of the average benefit provided to HCEs.

What is the Dependent Care FSA Eligibility Test?

This is to ensure that a reasonable percentage of Non-HCE's are eligible to participate in the DCAP. If certain Non-HCE's are prohibited from participating in the DCAP, the plan may be discriminatory.

What is the Health FSA 25% Concentration Test?

The Key Employee 25% Concentration Test applies to all pretax benefits provided under the plan. No more than 25% of the aggregate of all non-taxable benefits may be provided to key employees. This would include anything paid pretax (by an employee) or provided on a nontaxable basis (by the employer), including: - Group health, term life or disability coverage premiums - Health and Dependent Care FSA - Contributions to an HSA

What is the Health FSA Benefits Test?

Benefits provided under the Health FSA must not discriminate in favor of participants who are highly compensated employees (HCE). All benefits provided for participants who are HCE must be provided for all other participants.

Why do we have to test our Section 125 Health Plan?

Tab 1: FSA Data - You will need to list all employees that have been employed during the plan year that is being tested and complete all columns on this page, as they apply to your company and employees. 

Tab 2: Subjective Questions - You will need to Answer the Questions Starting with what year is being tested. Please Complete all following Yes/No Questions as they apply to your company. 

*Please Note: There is no action required in the Definitions Section of this Tab. This is only listed as helpful information to be used as a reference.

Where can I find more detailed information for what is needed on Tab 1?

This Tab will provide a detailed breakdown of all information needed for each column on Tab 1: FSA Data.

 Tab 4: Answer Types -This tab will provide you with the accepted format for answers to be entered throughout this spreadsheet. 

*Please Note: DO NOT change, add, or remove any headers, Columns, or other forms of formatting on any tab of this spreadsheet or the testing software will not be able to accurately read your spreadsheet and may result in a failure.