Highly Compensated Employee (HCE)

[Guest AJM 34]

I am looking for clarification on who is a Highly Compensated Employee.

I understand the basic definition of a HCE.

I am doing testing for 2006. Is a HCE someone who earned more than $95,000 in 2005? or more than $100,000 in 2005?

I have seen it done both ways but I want to know what is the correct way.

Thank you, AJM

[Guest Pensions in Paradise]

You may enjoy this thread:

HCE Determination

[John Feldt ERPA CPC QPA]

Also on the board today:

http://benefitslink.com/boards/index.php?s...c=34145&hl=

[Guest enough]

Hello, I found this message board very helpful and intersting. My question is as follows:

We are testing 2006 and in 2005, we had a restructuring that eliminated many of our HCE's. Due to this, there is a large count for people employed in 2005 to compute our Top Paid 20%, since they all left after more than 6 months of service.

When I prepared the look-back list of everyone that received compensation in 2003 and listed it in decending order and apply the 20% limit, 14 of the top 25 (my 20% number) had no service in 2006, but they and the remaining 9 are HCE's by definition.

The question is does this mean that I only use those 9 HCE's for the testing in 2006 (we are on the current year testing method)? Any employee below the 9 that remained in 2006 that did earn >90K, was not in the top 20% for 2005.

Note: We have no 5% owners in either year.