Each year, the County of Riverside is required to test the DCFSA plan for compliance with Internal Revenue Service non-discrimination requirements. These requirements place limits on the amount highly compensated employees can contribute to the DCFSA as compared to non-highly compensated employees. If the benefit provided to highly compensated employees exceeds this limit, the plan will fail the test and all highly compensated employee contributions to the DCFSA will become taxable. Highly compensated employees are defined as any employee who, received compensation in excess of $120,000 for Calendar Year 2015.
We monitor the DCFSA so that any necessary adjustments to contributions can be made prior to the end of the plan year. We recently ran a preliminary non-discrimination test on the DCFSA and the results indicate that the plan will not pass the non-discrimination test for the 2016 plan year unless corrective action is taken before the end of the plan year. In order to pass the test for plan year ending December 31, 2016, we have determined that highly compensated employee contributions must be limited to a maximum of $1,900.00.
Highly compensated employee who will exceed the revised limit before the end of the plan year will receive a communication regarding this necessary adjustment to their DCFSA election. The DCFSA payroll deductions for effected employees have been re-calculated so that the maximum total deducted from the employee’s paycheck will not exceed $1,900.00 by the end of this calendar year.
Should you have questions regarding this matter, please refer to the Frequently Asked Questions (FAQ).