DISCRIMINATION TEST

The IRS requires that Section 125 plans and health plans (including HRAs) not discriminate in favor of Highly Compensated Employees (HCEs) or Key Employees (Keys).

The discrimination tests check discrimination in Eligibility to participate as well as Utilization of the benefits.  

NOTE: Sole proprietors, partners, and shareholders greater than 2% ownership of S corporations (including family members) cannot participate on a pre-tax basis in a Section 125 (including Premium Payment, Health FSA, Dependent FSA, and HSA) or an HRA