Asked by: Uwe Priorpersonal finance personal taxes
What is Section 125 nondiscrimination testing?
Last Updated: 31st May, 2020
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Also to know is, is Section 125 nondiscrimination testing required?
The IRS requires non-discrimination testing for employers who offer plans governed by Section 125. This means any plans that allow employees to contribute pre-tax income into a benefits account, such as a Flexible Spending Account (FSA).
Also Know, what qualifies as a section 125 plan? A Section 125 Cafeteria Plan is an employer-sponsored benefits plan that lets employees pay for certain qualified medical expenses – such as health insurance premiums – on a pre-tax basis. Typically, they can use the pre-tax money to pay for health insurance premiums, retirement deposits, or other benefit options.
Also asked, what is nondiscrimination testing?
Non-discrimination testing requires that employees of a certain status (highly compensated employees and key employees) stay within a specific contribution rate, as determined by the contribution rate of non-highly compensated employees.
What are Section 125 benefits?
A section 125 plan is part of the IRS code that enables and allows employees to take taxable benefits, such as a cash salary, and convert them into nontaxable benefits. These benefits may be deducted from an employee's paycheck before taxes are paid.