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At what point is one a highly compensated employee?

Since you asked:

To determine whether an employee is a highly compensated employee (HCE), you must make calculations for 1) the look-back year and 2) the determination year.

In the look-back year:
a) The employee owns 5% or more of the employer, or
b) The employee received compensation exceeding $95,000 (2005, indexed in the future), and at the election of the employer, is among the top-paid group of employees (top 20% ranked by compensation)
c) If the top-paid group election is used, the employer can choose to include fewer employees in the HCE group, even if they make more than $95,000. If 35% of the employees earn more than $95k, including 5% owners, the top-paid group election will limit the selection of HCE group to 20% of employees.

In the determination year:
The employee owns 5 percent of the employer only.

It is important to note that the employee is an HCE if s/he meets either the look-back year or determination year conditions.

Hope that helps,
Bill
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