When you hear the words “non-discrimination tests” your first thoughts might be your 401(k) plan, but there are non-discrimination rules that apply to health and welfare plans. A word of warning, how to apply the nondiscrimination requirements is not always clear; having some experience with the qualified plan coverage rules will be of great value.
The basic premise of any non-discrimination testing is to demonstrate that the plan does not discriminate in favor of highly compensated individuals (HCI). Please note that the HCI definition is not exactly the same as the HCE definition used in qualified plans. The tests generally relate to not discriminating as to eligibility, contributions and benefits and in favor of either key employees or HCIs.
How ERISAdiagnostics, Inc. can help.
Currently, there is no correction program (as there is with qualified plans) should a test fail. It is very important that plan sponsors run the nondiscrimination testing before the end of the plan year allowing enough time to make any necessary corrections.
We can help you with your ERISA health and welfare non-discrimination testing; contact us for more information.
NOTE: Health Care Reform applies the IRC section105(h) nondiscrimination rules to non-grandfathered insured plans effective for plan years beginning after 9/23/2011. However, The IRS issued Notice 2011-1 which postpones the application of the nondiscrimination rules to insured plans until “regulations or other administrative guidance” is issued.