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55% Average Benefits Test

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What is the 55% Average Benefits Test?

Learn more about Dependent Care Assistance Programs (DCAPs) must satisfy the 55% Average Benefits Test, a utilization test that measures who is taking advantage of or using a benefit. The test ensures that highly-compensated employees (HCEs) do not participate disproportionately in relation to non-HCEs, and it is one of the more frequently failed tests. If the non-HCE average is not at least 55%  of the HCE average, the HCEs are taxed on all DCAP benefits received.

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