cpc0506 Posted September 16, 2010 Share Posted September 16, 2010 Client has 2 employees. One owner, other not. Both are HCE. If the client elects TOP PAID GROUP ELECTION, who is in the top of the test? Number of employees equals 2. 20% of 2 is 0.4. Rounding up the count is 1. Is this 1 in addition to the owner, so my HCE count would still be 2 or is the count just 1 and the owner take that spot. Can I get a discussion on this? Link to comment Share on other sites More sharing options...
jkdoll2 Posted September 16, 2010 Share Posted September 16, 2010 Client has 2 employees. One owner, other not. Both are HCE. If the client elects TOP PAID GROUP ELECTION, who is in the top of the test? Number of employees equals 2. 20% of 2 is 0.4. Rounding up the count is 1. Is this 1 in addition to the owner, so my HCE count would still be 2 or is the count just 1 and the owner take that spot. Can I get a discussion on this? Why would they want to do that? If they are both HCE's - they would pass automatically. Class allocated - give owner a contribuiton the non-owner - 0% - still pass since there are no NHCE's. Link to comment Share on other sites More sharing options...
Tom Poje Posted September 16, 2010 Share Posted September 16, 2010 any 5% owners are HCEs no matter what the comp. my strategy was to run the top paid group first (in your case, grab the highest paid of the 2 ees) and then add back any 5% owners. if there is a tie in comp, the regs say use any tie breaking procedure that will pass the test....er I mean any reasobale criteria to break the tie. why they woud have the top paid group election with 2 employees and both HCEs is beyond me. If they are both HCEs you pass testing no matter what. Link to comment Share on other sites More sharing options...
cpc0506 Posted September 16, 2010 Author Share Posted September 16, 2010 any 5% owners are HCEs no matter what the comp.my strategy was to run the top paid group first (in your case, grab the highest paid of the 2 ees) and then add back any 5% owners. if there is a tie in comp, the regs say use any tie breaking procedure that will pass the test....er I mean any reasobale criteria to break the tie. why they woud have the top paid group election with 2 employees and both HCEs is beyond me. If they are both HCEs you pass testing no matter what. Why the top paid election was chosen in the document I do not know..... But for discussion purposes, I understand that the owner is a HCE regardless of compensation amount, but if you were do just do the mathematics, if there are a total of 2 employees and 20% of 2 is 0.4 and you round up, that is 1 employee. Correct? So the question is: is my HCE count 2 - the one HCE and the one employee from the test calculation? Link to comment Share on other sites More sharing options...
Laura Harrington Posted September 16, 2010 Share Posted September 16, 2010 any 5% owners are HCEs no matter what the comp.my strategy was to run the top paid group first (in your case, grab the highest paid of the 2 ees) and then add back any 5% owners. if there is a tie in comp, the regs say use any tie breaking procedure that will pass the test....er I mean any reasobale criteria to break the tie. why they woud have the top paid group election with 2 employees and both HCEs is beyond me. If they are both HCEs you pass testing no matter what. Why the top paid election was chosen in the document I do not know..... But for discussion purposes, I understand that the owner is a HCE regardless of compensation amount, but if you were do just do the mathematics, if there are a total of 2 employees and 20% of 2 is 0.4 and you round up, that is 1 employee. Correct? So the question is: is my HCE count 2 - the one HCE and the one employee from the test calculation? Which one had the highest compensation in the prior year? Laura Link to comment Share on other sites More sharing options...
jkdoll2 Posted September 16, 2010 Share Posted September 16, 2010 any 5% owners are HCEs no matter what the comp.my strategy was to run the top paid group first (in your case, grab the highest paid of the 2 ees) and then add back any 5% owners. if there is a tie in comp, the regs say use any tie breaking procedure that will pass the test....er I mean any reasobale criteria to break the tie. why they woud have the top paid group election with 2 employees and both HCEs is beyond me. If they are both HCEs you pass testing no matter what. Why the top paid election was chosen in the document I do not know..... But for discussion purposes, I understand that the owner is a HCE regardless of compensation amount, but if you were do just do the mathematics, if there are a total of 2 employees and 20% of 2 is 0.4 and you round up, that is 1 employee. Correct? So the question is: is my HCE count 2 - the one HCE and the one employee from the test calculation? Which one had the highest compensation in the prior year? It depends on who has the highest compensation. If the non-owner has the highest - you will have to include both. Link to comment Share on other sites More sharing options...
Tom Poje Posted September 16, 2010 Share Posted September 16, 2010 in other words, if the nonowner had the higher comp you wopuld have 2 HCEs. or put another way, list all HCEs by comp. now add to that list 5% owners. don't start with the owners and say, I already have enough HCEs so I woont look at comp. Link to comment Share on other sites More sharing options...
John Feldt ERPA CPC QPA Posted September 16, 2010 Share Posted September 16, 2010 Also, be careful of the Top Heavy minimum if the one HCE getting zero is not an officer (not key). Link to comment Share on other sites More sharing options...
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