Identifying HCE's

[Guest elang]

When writing 401(k) Plans, we have always written the Plan to use compensation from the Look-Back year to determine an HCE. Is there any reason we wouldn't be able to use current year instead?

Thanks in advance for your help.

[Guest Sieve]

Yes, there is a reason. An individual who is an HCE based only on compensation is an HCE based on the amount of compensation in the prior year, NOT in the current year. Them's the rules . . .

[12AX7]

Elang, perhaps you're thinking of the election for testing (ADP/ACP). If you're using a pre-approved plan, you would not have the ability to make that election for HCE determination. Or, perhaps you're thinking of the calendar year election for determining HCEs, if the plan year is not a calendar year.