Highly Compensated

[MBCarey]

Can someone tell me if the son of an owner is hired in July and will not be eligible for the plan until he has a year of service. Is he still considered HC for 2008?

[ERISAnut]

Of course he is HCE. He's just not eligible due to age/service requirements; but still an HCE.

Hope this helps.

[MBCarey]

Sorry to be so dense. I would not count him in the testing until he is eligible, correct? I think I've been at this tooo long.

Thanks

[ERISAnut]

Sorry to be so dense. I would not count him in the testing until he is eligible, correct? I think I've been at this tooo long.

Thanks

You are correct. He will be excluded from all tests because he as failed initial eligibility (age/service).

[Jim Chad]

I would add "unless you are testing excludables seperately.

[ERISAnut]

I see what you are saying, but you must first meet eligibility under the terms of the plan to be includable in any test. If the plan prescribes a 21 & 1 provision, then no one who is less than 21 or who worked less than 1 year of service will be in any test performed by the plan (because the failed initial eligibility). That doesn't prevent them from being HCE, they are just an HCE who failed initial eligibility; and are therefore excluded from all tests.

If the plan, however, had immediate eligiblity then you would be allowed to test separately between the early entrants and the regular 21 & 1 employees. Heck, you may also test the 'early entrant HCE' in the group with the regular 21 & 1 employees.

[Guest TooMuchFreeTime]

Am I missing something? If he was hired in 2008, he wouldn't have any 2007 compensation. Absent that, isn't it impossible for him to be an HCE?

Or is there some sort of attribution rules I'm missing involving the owner/father?

[ERISAnut]

Am I missing something? If he was hired in 2008, he wouldn't have any 2007 compensation. Absent that, isn't it impossible for him to be an HCE?

Or is there some sort of attribution rules I'm missing involving the owner/father?

Section 318 of the IRC. You own what your parents own for HCE purposes.

[BG5150]

I would add "unless you are testing excludables seperately.

From what I understand, he's not even eligible yet, so he isn't even excludable. He simply isn't in the plan.