Determining Highly Compensated Employee

[Stash026]

I'm having a disagreement with the financial manager, so I want to confirm.

Non-owner was hired mid-year 2013 and earned less than $115,000. In 2014, his first full year of service, he earned well over the $120,000.

In other words, in the look back year he didn't earn enough but it was a partial year. By the letter of the guidelines I do not believe he would be an HCE.

Thoughts?

[Tom Poje]

well the IRS website

http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Definitions

has the following definition
(but perhaps the financial manager knows something the IRS doesn't. if he does, he should tell them).


Highly Compensated Employee - An individual who:
Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or
For the preceding year, received compensation from the business of more than $115,000 (if the preceding year is 2013 or 2014; $120,000 if the preceding year is 2015), and, if the employer so chooses, was in the top 20% of employees when ranked by compensation.

[My 2 cents]

Pretty sure that the fact that the person was employed for only part of the year does NOT matter. As a non-owner, I think it is just the total paid that year.