Section 125 cafeteria plans must pass nondiscrimination tests so pre-tax benefits do not favor highly compensated or key employees. Failing a test makes those employees’ benefits taxable, so testing is done before year end.
Usually no. If you pay premiums pre-tax through a Section 125 plan, your election is locked for the plan year unless you have a qualifying life event. Without a QLE, you generally must wait until open enrollment.
A Section 125 cafeteria plan, which lets employees pay premiums and fund FSAs with pre-tax dollars, must pass nondiscrimination tests showing it doesn’t disproportionately favor highly compensated or key employees. Failing the tests makes those individuals’ pre-tax benefits taxable.