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Thanks Tom. Is Q-3 still in the temporary reg 1.414(q)-1T ? As far as I can tell, only Q-9 is in the final 1.414(q)-1.

1.414(q)-1 Q-3(b) Rounding and tie breaking last sentence ....In such cases, the employer may adopt any rounding or tie breaking rules it desires, so long as such rules are reasonable, nondiscriminatory, and uniformly and consistently applied. (I guess dice rolling (unless they are weighted), paper- rock -scissors, or other means could be used)

I think the Regs say you can round up, down or nearest al long as it is done in a consistent and nondiscriminatory manner.

For whatever it's worth, I've always rounded up (I can't recall where I read this). That is, 25 employees is 5 in the top paid group, 26 employees is 6 in the top paid group. So in your case, EE6 would also be in the top paid group, and you would have 7 HCE's.

Hope you bet a pizza on this one. Have your colleague read item (3) (or even act like Bart Simpson and write it on the chalkboard 100 times) Code, section 414(q) (q) Highly compensated employee (1) In general the term “highly compensated employee” means any employee who— (A) was a 5-percent owner at any time during the year or the preceding year, or (B) for the preceding year— (i) had compensation from the employer in excess of $80,000, and (ii) if the employer elects the application of this clause for such preceding year, was in the top-paid group of employees for such preceding year. The Secretary shall adjust the $80,000 amount under subparagraph (B) at the same time and in the same manner as under section 415 (d), except that the base period shall be the calendar quarter ending September 30, 1996. (2) 5-percent owner An employee shall be treated as a 5-percent owner for any year if at any time during such year such employee was a 5-percent owner (as defined in section 416(i)(1)) of the employer. (3) Top-paid group An employee is in the top-paid group of employees for any year if such employee is in the group consisting of the top 20 percent of the employees when ranked on the basis of compensation paid during such year.