414q Definition of "Highly Compensated"

Currently, 2007 compensation in excess of $100,000.  There are other tests as well.

Can a company set its own limit, or specify say the top 20-50 compensated?

Hi Joseph,

IRS Notice:  http://www.irs.gov/newsroom/article/0,,id=174873,00.html

Milliman posted this read:  http://www.milliman.com/expertise/employee-benefits/publications/cab/pdfs/CAB10-18-07-COLA.pdf

Hope these help.

Wendy

The definitions are statutory in the Internal Revenue Code section 414.  There is an election that employer can make to limit the amount of Highly Compensated employees (HCE's).  For those employers who maintain a high level of average compensation, they may limit the HCE count to 20% of the workforce.  This must be described in your plan.  Hope that helps.

http://www.irs.gov/newsroom/article/0,,id=174873,00.html

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $100,000 to $105,000.

It is $105,000 for 2008.  Mercer is forecasting $110,000 for 2009.

Hi Michele:

The definition of a HCE is basically the same; only the dollar limit has changed for 2008.  Specifically:

Section 414(q) of the Code defines "highly compen-sated employee." This definition applies for purposes of section 401(k), including the ADP test. Effective for years beginning after December 31, 1996, the term "highly compen-sated employee" (HCE) means any employee who: 1) was a 5-percent owner at any time during the year or the preceding year, or 2) for the preceding year had compensation (as defined in section 415(c)(3)) from the employer in excess of $105,000 and, if the employer so elects, was in the top-paid group for the preceding year.

John

It's $105,000