HCE determination for short plan year for partnership

[AKconsult]

Normally, for a short plan year the HCEs are determined by their compensation for the 12 month period prior to the short plan year.

However, I’ve heard that in a partnership, the partner’s pay is deemed to all occur on the last day of the FY. In that case, how would we determine HCEs based on compensation in a situation where the plan was amended to create a short plan year from 10/1/12 - 12/31/12?

[Belgarath]

IMHO - The lookback year for the compensation test is 12 months. So you'd look at compensation from 10-1-11 to 9-30-12. Assuming you are counting all comp for a calendar year as being earned on 12/31, then this would be all compensation in 2011, as 12-31-11 falls within the lookback period.

[ETA Consulting LLC]

Also, you cannot forget the 5% owner requirement; anyone who owns more than 5% of the employer in the current or preceding year is an HCE; regardless of compensation. This is what, typically, makes the Partners HCEs.

Good question on the Compensation determination, though.

Good Luck!