If establishedunder objective business criteria, bona-fide employment-basedclassifications that do not discriminate in favor of "theprohibited group" may be a reasonable classification ofemployees.
Under federal law, employer provided benefits eligible for taxexclusions are subject to numerous nondiscrimination provisions.These provisions all are based on one important condition: ensuringexecutives, key employees or other highly paid individuals ("theprohibited group") are not treated more favorably than otheremployees.
When to perform testing
Nondiscrimination testing is a necessary function of providing acafeteria plan, and under the 2007 proposedregulations, Code Section 125 nondiscrimination tests are requiredto be performed annually, as of the last day of the plan year.
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