Topic Archive: Highly Compensated Employees

Facts

I am fed up with sponsoring my current retirement plan.  My wife and I contribute the maximum amount we can in deferrals each year.  Due to low participation by our employees, we fail ADP testing every year and have to take refunds.

Facts

We set up our company 401(k) plan soon after we started our business.  At the time, we were a small tech company with only a couple of employees.  Over the years the company has grown exponentially, and business has been good to us…really good.

Because of this, the demographics of our company have changed completely.  We have too many of our people who are highly compensated employee (HCEs), and it is causing havoc with our nondiscrimination testing.  Last year, some employees had to take corrective distributions of their deferrals due to failing the ADP test for the first time.

Facts

Our company sponsors a 401(k) plan for our employees.  The owners of the company have always been somewhat secretive in terms of sharing detailed information about themselves and their families.  The current environment of selling information for marketing use and identity theft has only intensified that.

Facts

Our 401(k) plan failed the ADP test for the first time this year.  We decided to correct the failure by making refunds to the highly compensated employees instead of making additional contributions for the other participants.  However, when we got the actual refund amounts from our TPA, we were surprised to see that those HCEs with the highest deferral percentages are to receive smaller refund amounts.

Facts

People in the retirement plan business sure do like their acronyms.  All these letters get thrown around, and I do not know what half of them mean.

Facts

People in the retirement plan business sure do like their acronyms.  All these letters get thrown around, and I do not know what half of them mean.

Facts

I and my three business partners each own 25% of our company. We do not have any employees other than the four of us. We would like to set up a retirement plan, but we know there are nondiscrimination tests that limit how much owners can benefit based on how much the employees receive.

Facts

We have a 401(k) plan that allows for both employee deferrals and a company match. Our annual testing each year is based on the amounts contributed in the previous year. That has allowed us to notify our highly compensated employees of the maximum they can contribute each year to ensure we pass testing.

Whether we’re talking fashion or music or architecture or barber shops, it seems things that have faded from existence eventually come back around.  See if this cycle looks familiar:  cutting edge becomes status quo becomes so last week becomes so [insert decade] becomes retro becomes vintage.