One of the major perks associated with flexible spending accounts (FSA), dependent care accounts (DCA), and health reimbursement accounts (HRA) is the substantial tax savings employers and their employees experience. 

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These types of accounts allow employees to contribute a certain amount of their gross income, before taxes are taken, in exchange for employer-sponsored benefit plans.

 

Because of the tax-saving nature of these types of plans, the IRS wants to make sure that an employer’s plan does not favor company officers, owners, or other “highly-compensated” or “key” employees. This requirement is fulfilled through discrimination testing.