The IRS imposes nondiscrimination rules on Section 125 plans (also known as flexible benefit plans, cafeteria plans or pre-tax premium plans) and self-funded group health plans. The purpose of the rules is to prevent employers from favoring highly compensated employees to an impermissible degree. The general consequence of the failure of the tests is that the highly compensated employee will have taxable income relative to the discriminatory benefits they receive.
Contact your Cowden representative for more information on this or other compliance issues.
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