Plan does not benefit HCEs

[jkharvey]

First part of my question involves the definition of HCE. I'm of the understanding that unless there are employees of a nonprofit entity that meet the compensation amount of the HCE definition ($85000), then there are no HCEs. Is this correct?

If this is correct, the plan then only benefits NHCEs and would automatically pass 401(a)(4) and 410(B)? The point is this. The plan sponsor wants to provide a benefit for the executive director that is greater than the other employees. Is this permissable? My first thought is that since there are no HCEs benefitting, there would not be a problem with providing a different level of benefits for the various HCEs. Any thoughts on this issue would be appreciated.

I should point out that the discrepancy between salary levels of the executive director and other EEs is considerable.

[Carol V. Calhoun]

As far as I can make out, you are right. Only pitfall to avoid would be if you allowed the executive director (or anyone else) to make salary reduction contributions, and did not provide the same right to other nonexcludible employees. See I.R.C. § 403(B)(12). But otherwise, the plan you propose should work.

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