Which of the following benefits does nondiscrimination testing apply to in a Cafe Plan?

Nondiscrimination testing is a critical component of certain employee benefit plans, ensuring that benefits offered do not disproportionately favor highly compensated employees over lower-paid employees. In the context of a Cafe Plan, flexible spending accounts (FSAs) are subject to these nondiscrimination requirements.

FSAs are designed to provide employees with a tax-advantaged way to save for out-of-pocket healthcare expenses. However, to maintain their tax-exempt status, employers must demonstrate that the benefits provided through FSAs do not favor highly compensated employees. This ensures that all employees, regardless of their pay grade, have equitable access to the health benefits provided.

In contrast, benefits such as retirement accounts may have their own sets of compliance and testing requirements, but these do not fall under the same category as the nondiscrimination testing applicable to cafeteria plans. Similarly, long-term disability insurance and employee discounts are not typically subject to the same nondiscrimination rules as FSAs within a Cafe Plan context. Thus, flexible spending accounts are the correct option when discussing nondiscrimination testing within a Cafe Plan.