determining a highly compensated employee

[Guest abg]

I am trying to determine if someone is "highly compensated" in a 401k plan for "adp" testing purposes. Their prior plan year wages was in excess of $80,000 but the current plan years wages was only $54,000.

Can anyone offer their technical expertise or experience?

[david rigby]

I believe that the comp in current year is irrelevant. The amendments to the process of determining HCEs was for the purpose of identifying HCEs at the beginning of the plan year, so use the prior year comp. the only exception is that a 5% owner in the prior year OR the current year is an HCE.

[Guest klc]

I would agree with Mr. rigby. Current year comp. is not relevant. Use prior year. 5% owner is in current year or prior year.

[Guest Tom Geer Daily Access Concepts]

The 5% owner rule is current OR prior year. The $80,000 rule is prior year only. Please note that the employer can elect to limit the $80,000 people to those in the top 20% of employees by compensation

------------------

[Guest klc]

Tom, good point about limiting the over $80,000 wage earners to the top 20%.

[Richard Anderson]

Does the top 20% election have to be in the plan document?

[Kathy]

Yes, it is my understanding that, when we do finally amend for GUST, we will have to include any provisions we used for determining HCEs or running ADP and/or ACP tests in the years after the new rules became effective but before the amendments are required. This could mean that your GUST amendments will contain a different provision for each of ?4? years?

[This message has been edited by Kathy (edited 08-29-1999).]