--- title: Do 401(k) Testing Requirement Apply to Owner-Only Plans? description: There are nondiscrimination tests that limit how much owners can benefit based on how much the employees receive. 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[ DWC ](https://www.dwc401k.com/blog/author/dwc) | Published: 11/14/2017 | [Highly Compensated Employees](https://www.dwc401k.com/blog/topic/highly-compensated-employees), [Question of the Week (QOTW)](https://www.dwc401k.com/blog/topic/question-of-the-week-qotw), [DWC](https://www.dwc401k.com/blog/topic/dwc), [Key Employee](https://www.dwc401k.com/blog/topic/key-employee), [Nondiscrimination Testing](https://www.dwc401k.com/blog/topic/nondiscrimination-testing), [401(k) Q&A](https://www.dwc401k.com/blog/topic/401k-qa) ## **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. ## **Question** Are we subject to those same nondiscrimination tests even if we don’t have any employees? ## **Answer** This is one of those few instances with a short and simple answer. No, you are not subject to the nondiscrimination rules based on the facts presented. Now for some additional commentary. The nondiscrimination rules limit the benefits to so-called [highly compensated employees](https://www.dwc401k.com/knowledge-center/who-are-highly-compensated-and-key-employees) (or HCEs, because everything has to be an acronym) based on the benefits provided to non-HCEs. An HCE is generally anyone who owns more than 5% of the company or anyone who earned more than $120,000 in gross compensation from the company in the previous year. If a plan covers only HCEs or only non-HCEs, it is deemed to automatically satisfy the various nondiscrimination tests. Since the only employees in your company each own more than 5%, they are all HCEs, so you can establish a retirement plan without worrying about the testing requirements. There is an important nuance to keep in mind. As a general rule, any employee who is at least 21 years old and has worked for the company for at least 1 year (with a minimum of 1,000 hours of service) must be considered when it comes to running nondiscrimination tests on the retirement plan. That means a company with employees who are non-HCEs cannot completely exclude those workers from the retirement plan and then claim that the plan covers only HCEs. One of the tests (called the [top heavy determination](https://www.dwc401k.com/knowledge-center/nondiscrimination-testing-top-heavy-determination)) compares key employees to non-key employees rather than HCEs and NHCEs. Key employees are generally owners and officers, so it is possible for someone to be an HCE but not a key employee. In that instance, there are some additional considerations that must be factored into the design of the retirement plan. For additional information about the nondiscrimination testing requirements and HCE/key employees, please visit our Knowledge Center [here](https://www.dwc401k.com/knowledge-center/nondiscrimination-testing-overview) and [here](https://www.dwc401k.com/knowledge-center/who-are-highly-compensated-and-key-employees). 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