Top-paid group elections

[Guest NiceGuyMike]

I've only used a couple of these, so I want to check my stuff here. I calculate that up to 12 people would be in the top-paid group. In reviewing lookback year comp for this client, the top 8 employees have comp more than $90K in 2003. The president of the company (who I suspect is an owner, but we can't get confirmation yet) is NOT in the top-paid group as ranked by comp.

1. Should I look at the results as a maximum number who should be included?

2. Should I only include those with comp greater than $90K?

3. Should the owner be included regardless of comp?

4. If the owner is included, does that reduce the number of top-paid people I should include? (down from 12 to 11, or 8 to 7)

Thanks for your assistance with this. These calcs always tie me up in knots.

Michael

[Mike Preston]

No.

No.

Yes.

No.

[Blinky the 3-eyed Fish]

Perhaps an illustration would help. If you are doing the testing for 2003, you look at 2002 information.

80 employees less 40 exclusions (under 21, less 6 mo. employed, etc.) leaves 40. 20% of that is 8. The 8 people who earned the most AND had compensation over $90,000 are HCE's based on compensation.

See how the owner and the fact that he is a HCE does not factor into this calculation. It is compensation based only.

[Guest NiceGuyMike]

Many thanks for the replies on this; I simply haven't had enough practice on top-paid group elections because I mostly work with small groups for which they don't have a real impact.

I've done some more research and consulted with others I know in the field and found that, yes, the owner gets included regardless of comp (he otherwise wouldn't have made enough money in the lookback year). I also determined that the number of employees included is an absolute; that is, if the test yields a result of 12 maximum, I include up to 12 employees in the top-paid group, as long as their comp is more than the HCE limitation. The owner is included in that group.

As a result of this test, I've put together a top-paid group calculation worksheet for our consultants. Perhaps this way, we won't have to re-invent the wheel everytime we run into this!

Thanks again,

Michael

[Blinky the 3-eyed Fish]

I've done some more research and consulted with others I know in the field and found that, yes, the owner gets included regardless of comp (he otherwise wouldn't have made enough money in the lookback year).

I am not sure what you mean by this. If it is that the owner gets included as an HCE because of his ownership (>5%), then yes, you are correct. But the context of this discussion is the top paid election. So, if you mean that the owner gets included in the top paid group because he is the owner, then that is incorrect.

[Guest NiceGuyMike]

Blinky, you're correct on that, and I'm sorry that was confusing.