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KEYWORD:
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Employee Benefits Bulletin December 2001TIDBITS, TRICKS & TRAPSDETERMINATION OF HCE STATUS IN NONDISCRIMINATION TESTINGNondiscrimination testing is designed to prevent highly compensated employees (“HCEs”) from making or receiving retirement plan contributions or benefits that are disproportionately high in comparison with those made or received by nonhighly compensated employees (“NHCEs”). The determination of HCEs for purposes of nondiscrimination testing is normally made by an analysis of two factors: 1) company ownership and 2) compensation. An employee who is a 5% owner during the current or previous year is always classified as an HCE, regardless of compensation. HCEs are also determined by looking back at the compensation earned in the year prior to testing (the “lookback year”). For example, those employees who earned $85,000 or more in the 2000 lookback year will be considered HCEs for 2001 plan year testing. Back to Newsletter home |
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