HCE determination - stupid question

[MarZDoates]

I know I should know the answer to this, but am drawing a blank.

When determining the HCEs for 2005 (determination year) ... comp greater than 80,000 in lookback year, as indexed... would you use the COLA adjusted amount in effect for 2004 ($90,000) or 2005 ($95,000)?

For example if employee's wages in 2004 were $90,000, is he an HCE for 2005? Thanks.

[Tom Poje]

I believe he is one cent short of being an HCE in 2005 since his 2004 does not exceed the 90,000 amount.

[Guest Dash02]

I've struggled with this question too. I think Tom's answer is correct, but have never been able to find the authority to support it. Does anyone have a cite?

[Everett Moreland]

Sal Tripodi, The ERISA Outline Book 15.7 (2005 Edition), is where I looked recently when I got frustrated with the time it was taking to anwer this question.

[Kevin C]

How about Section 414(q)?

414(q)(1) IN GENERAL. --The term "highly compensated employee" means any employee who --

414(q)(1)(A) was a 5-percent owner at any time during the year or the preceding year, or

414(q)(1)(B) for the preceding year --

414(q)(1)(B)(i) had compensation from the employer in excess of $80,000, and

414(q)(1)(B)(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.

[JDuns]

If his comp were $91,000 for 2004, he would be an HCE for 2005. The applicable comp threshhold is the 2004 limit not the 2005 limit.

[Lori Friedman]

MarZDoates, Don't you know that there are no stupid questions (except, of course, for the ones that I ask)?

[MarZDoates]

Thanks Lori, but apparently I didn't phrase my question very well....I should have said more than $90,000. Thanks for all the replies! I think that answers my question.