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That's because the HCE's average deferral percentage may not exceed the average deferral percentage of the lower compensated group by more than 2%. In short, if the LCE as a group average a contribution of 5% of compensation, the HCE may not contribute more than 7% or $10K, whichever is less.

Thanks for the quick response!

My contribution is going to be limited by what others have contributed? Is this for my firm or the whole country? I know these are IRS regulation we're talking about, but what could possibly be the logic behind this? Besides the IRS getting a whack at more of my money that is?

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