Another Top Paid Group question

[FJR]

Need some clarification. I have a company with 10 full time EE's all eligible to participate in a 401(k). 7 of the 10 have comp. last year over 90k. of the 7, one is an officer by definition and one is more than 5% owner. If the Top paid group election is made, I am trying to calculate how many HCE's to use in the ADP test.

20% gives me 2. So is it 2 EE's with the highest comp. plus the officer and the 5% owner that will be used in the ADP test as HCE's?

Thanks

[Mike Preston]

Yes, if they aren't already included. That is, you don't pick the top 2 other than the owner. By the way, I don't think officer status means anything to the determination of HCE's. You may be confusing it with the determination of key employees.

[FJR]

Mike, yes you are right about Officer. So, if my 5% owner happens to be one of the highest paid, then the ADP test would be him, plus the next highest paid for a total of 2?

[Mike Preston]

Correct.