Lookback Year Compensation For HCE Status In Off-Calendar Year Plan

[Guest merlin]

Plan Year is 12/31-12/30. Plan defines comp as comp for calendar year ending with or within the plan year. A participant's 2001 W2 was 100,000, but only 27,000 in 2002. Which do I use to determine his status as an HCE for the plan year beginning 12/31/02? The comp actually earned in the lookback year (27,000), or the comp that applies for benefit accrual and funding (100,000). Assume the calendar year election is not made.

[Mike Preston]

I must be missing something, merlin. If the plan year from 12/31/2002 through 12/30/2003 uses comp during the calendar year ending with or within the plan year, wouldn't that be the 2002 calendar year? That is, $27,000? The look back year for the 12/31/2002 through 12/30/2003 year is the 12 month period ending 12/30/2002, unless the calendar year election is made, in which case the lookback year is the calendar year ending with or within the plan year; that is, the 2002 calendar year. In other words, there isn't much difference in the period used to determine HCE status in this case. It should be around $27,000.

I don't understand how the 2001 calendar year compensation is used for any purpose for the 12/31/2002 through 12/30/2003 plan year.

[Guest merlin]

You didn't miss anything, Mike. Your answer is what I thought. I just wanted to hear someone else say it. Thank you.