HCE compensation clarity request...

[Beltane]

In October of 2012 the IRS announced the definition of an HCE for 2013 remains unchanged at $ 115,000.

So this implies the prior compensation limit for 2012 was also $ 115,000.

And the amount for 2011, announced in Oct of 2010 I presume, was for 2011 $ 110,000.

Fine...

Now...as we sit here doing our 2012 plan year testing....our lookback year is 2011....so, ( I'm speaking in general here, ignore the top 20% issues, etc...) , anyone who had gross compensation over $ 110,000 in 2011 is in the HCE group when we test for 2012...Correct? Even if their compensation was much less than that in 2012....Correct?

And, let's say hypothetically the IRS in October of 2013 raises this definition to $ 120,000....A year from now, when we're doing 2013 testing anyone with gross comp above $ 115,000 in 2012 will be an HCE in our 2013 testing....so we won't use the $ 120,000 level until 2015...when we're testing 2014 plan years.

Confirmation and/or corrections would be really appreciated. I just don't like assuming everybody knows this when it's so easy to make this a systematic error.

thanks.

[chc93]

My understanding is "yes"... if determining HCE status for 2012, look back to 2011 compensation and use the HCE compensation limit for 2011, regardless of compensation in 2012. And so forth...

[Bird]

I agree. Use the comp limit for the lookback year.

[movedon]

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