HCE determination for new business

[Guest MPLipp]

A business is formed in November of 2003, and institutes a 401k plan immediately. None of the corporation's owners are employees, so there aren't any HCEs by virtue of ownership. The plan operates on a calendar year basis. How do you determine HCEs based on compensation when there isn't a 12 month look back year? How do you make the determination for the short plan year 11/2003 through 12/2003, and how do you make the determination for calendar/plan year 2004?

[WDIK]

The look-back year is the 12-month period immediately precdiding the determination year.

There is no look-back year for the first year of an employer.

[Guest Sieve]

As WDIK says, there's no look-back year if it's a brand new employer (as, I assume, is the case in your facts). However, it might be possible for there to be a look-back year for a new employer arising from a merger/acquisition situation.

[buckaroo]

I would say no HCEs in 2003 plan year (based on no prior comp).

I would also say probably no HCEs in 2004 plan year unless someone earned over limit during when company was active (11/2003 --12/2003??).