Non-discrimination testing, simplified.

Non-discrimination testing is a set of IRS-mandated tests that employers must run on certain benefit plans to confirm that the plans do not favor highly compensated employees (HCEs) or key employees over other workers. The tests vary by plan type — cafeteria plans, medical FSAs, dependent care FSAs, health reimbursement arrangements, and self-insured medical plans each have their own required tests. Employers who fail to run required tests, or whose plans fail the tests without corrective action, face potential plan disqualification and tax consequences for affected employees.

Generally, any employer that offers a plan governed by Section 125 — meaning any plan that allows employees to contribute pre-tax income to a benefits account, such as a cafeteria plan, Premium Only Plan (POP), or FSA — is required to run NDT. Non-discrimination testing is also required for plans governed by Section 105(h), including health reimbursement arrangements (HRAs) and self-insured medical plans (SIMPs). NDT applies regardless of industry — any U.S.-based employer offering these plan types must comply.

WEX supports non-discrimination testing for five plan types: cafeteria plans (Section 125), medical FSAs (Health FSA eligibility testing), dependent care FSAs (Section 129), health reimbursement arrangements (Section 105(h)), and self-insured medical plans (Section 105(h)). Medical FSAs and dependent care FSAs can each be tested on their own standalone template, separate from the cafeteria plan test.

The IRS does not specify a mandatory frequency, but the general best practice is to run tests at least once during the plan year — and again after any plan design changes or significant workforce changes that could affect results. WEX’s subscription pricing covers unlimited test runs throughout the plan year, so employers can retest after adjustments without incurring additional per-test costs. Running tests early in the plan year, rather than only at year-end, gives employers time to make corrections before plan disqualification becomes a risk.

A failed test means the plan is providing disproportionate benefits to highly compensated or key employees relative to other participants. The consequences vary by plan type but can include plan disqualification, loss of pre-tax status for affected employees, and IRS scrutiny. WEX provides failed test considerations — guidance on the options available to bring the plan back into compliance — so employers understand what corrective steps are available and can act before year-end deadlines.

For employers using WEX benefits through the LEAP employer portal, non-discrimination testing is included at no additional cost. Employers upload plan data directly in LEAP, run tests, and access instant results and test history — all within the same platform used to manage other benefit accounts. No separate login, no separate vendor relationship.

NDT Powered by WEX is a white-labeled version of WEX’s non-discrimination testing solution designed for partners, TPAs, and other organizations that want to offer NDT as a branded service to their employer clients. It includes custom branding, employer setup and access management, employer summary reporting, employer self-service, and the flexibility to sell NDT as a standalone service. An annual subscription fee per employer covers unlimited testing for that employer’s plans.

Health savings accounts (HSAs) are not subject to the same non-discrimination testing requirements as cafeteria plans, FSAs, HRAs, or self-insured medical plans. However, employer contributions to HSAs through a Section 125 cafeteria plan must meet comparability rules, and the cafeteria plan itself remains subject to NDT. Employers should consult their legal or tax advisors for guidance specific to their plan structure.