Highly Compensated Employee?

[Guest panther84]

In 2008 I recieved a salary of $104,000. In 2005 I was relocated and recieved moving expenses and a housing allowance over 3 years. The last $2500 in 2008. The salary and allowance brought my total compensation to $106,500.

I am now considered a highly compensated employee. Is there anything I can do or am I just out of luck.

[K2retire]

Whether or not you are a highly compensated employee (assuming you're not an owner of the business or a relative of an owner) changes each year depending on whether or not your income is over the threshold for the previous year. The amount is adjusted for inflation each year. If your income last year was over, you are an HCE for this year and there's nothing you can do about it.

[Guest panther84]

I am being downsized in 2009 and the termination package is much more favorable to someone classifyed as a non-HCE.

[J Simmons]

Is your company using the Internal Revenue Code definition (Section 414(q)) for this purpose?

[Guest panther84]

Not sure. All it says is 'as defined by the IRS'.

[jkdoll2]

I would say yes you are HCE in 2009 since your comp is over $105,000.00 in 2008.

[RCK]

I'd think that the details of a termination package would be discretionary. Based on the IRS's rules, you are absolutely an HCE. But you can argue that you should not be treated as one.

I'd go in to HR or whoever is handling the process and present my case.

[jpod]

Perhaps the employer is funding some of the severance benefit through a QP enhancement for NHCEs, and outside the QP for HCEs. Total speculation on my part.

[BG5150]

Was it all paid on W2? Anything on 1099?

[Guest Sieve]

The IRC definition of compensation for determining HCEs--if your employer is, in fact, using that as its definition for severance package purposes--is an IRC Section 415 definition of compensation, which includes as compensation "amounts paid or reimbursed by the employer for moving expenses . . . but only to the extent that at the time of the payment it is reasonable to believe that these amounts are not deductible by the employee . . ." (Treas. Reg. Section 1.415©-2(b)(3).)

Perhaps you can argue the point of deductibility with the employer to become reclassified as an NHCE.