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Bill
Bill, Enrolled Agent
Category: Tax
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Experience:  EA, CEBS - 35 years experience providing financial advice
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Our cafeteria plan is a premium only plan. It fails the discrimination

Resolved Question:

Our cafeteria plan is a premium only plan. It fails the discrimination testing called the Key Concentration Test. 1) Can we rely on the premium only safe harbor contained in the 2007 Proposed Regulations? 2) If we cannot rely on this, how do we remedy the failure for the upcoming year: the amount that exceeds 25% of the tax favored benefits is $850 per month, there are two key employees. Do we add the $850 to their taxable income? Do we have them contribute to the plan on an aftertax basis? How do we fix this so that the two key employee's medical and dental participation is below the 25% of the total of all the employee's participation?
Submitted: 7 years ago.
Category: Tax