Guest JDK Posted February 10, 2007 Posted February 10, 2007 I have a new client who started their business in Aug. 2005. They started a 401(K) Plan as of 1/1/06. I understand that the owners of the co. will be HCE for the first yr based on the ownership of 5% or more of the co. My question is in using the look back year, can a determination of HCE be made for any other ee's based on prorated compensation from Aug 2005-Dec2005? Or for the first year of a plan is it owners only?
Tom Poje Posted February 12, 2007 Posted February 12, 2007 hce determination is always based on a 12 month period. no pro ration, even if there was an intial short period due to a new company being formed. so in your case, doubtful if there are other HCEs than owners.
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