HCEs in First Year of Employer

[dmb]

First year of Non-profit organization is 2010. There are no owners and three of ten participants are earning more than $110,000 in 2010. Are there any HCEs in 2010 if there was no employer in 2009? Thanks.

[Guest Sieve]

No.

[Guest Brian Theismann]

I see no exception in the Code or regs for the first year of operation, so I would tentatively agree with Sieve that such employees would not be classified as highly compensated.

[Guest Brian Theismann]

Just checking-more than 5% ownership in the current year or the previous counts in making one an HCE, right?

Right. 414(q)(1)(A): "The term 'highly compensated employee' means any employee who...was a 5-percent owner at any time during the year or the preceding year..."

That passage does not seem to leave much doubt.

[Guest Sieve]

Question related to a non-profit with no owners.

[dmb]

Question related to a non-profit with no owners.

Thanks for all the responses.