Vision Payroll

October 21, 2011

Question of the Week: What Are the 2012 Highly Compensated Employee Limits?

What Are the 2012 Highly Compensated Employee Limits?
What Are the 2012 Highly Compensated Employee Limits?
This week’s question comes from Carla, a company president.

Carla asks:

We’re doing some compensation planning for next year. What are the 2012 Highly Compensated Employee Limits?

Answer: The IRS has just released updated information for 2012.

IRS Releases 2012 Highly Compensated Employee Limits in IR-2011-103

In IR-2011-103, the Internal Revenue Service (IRS) announced that for 2012 the Highly Compensated Employee Limitation under §414(q)(1)(B) of the Internal Revenue Code of 1986 will increase to $115,000. Non-discrimination testing in some types of retirement plans limits the deferral rate of “highly compensated employees” (HCEs) based upon the deferral rate (ADP) of the “non-highly compensated employees”.

Highly Compensated Employee Compensation Limit Had Been $110,000

For 2012 plan year testing, an HCE is anyone who was a “5-percent owner” at any time during 2011 or 2012 or anyone who received in excess of $110,000 in compensation during 2011 and, if elected by the employer, is in the top twenty percent of employees based upon compensation. The HCE limit was also $110,000 for 2010 and 2011 plan year testing. The new $115,000 limit for 2012 is to be used for 2013 plan year testing.

Look-back Provision Impacts HCE Testing Period

Since the law includes a look-back provision, employees who earned more than $110,000 in 2010 are generally considered HCEs for 2011 plan year testing, employees who will earn more than $110,000 in 2011 are generally considered HCEs for 2012 plan year testing, and employees who will earn more than $115,000 in 2012 are generally considered HCEs for 2013 plan year testing.

Contact Vision Payroll for More Information on HCEs

Contact Vision Payroll if you have questions on changes to the HCE definition for 2012 to be used in 2012 plan year testing or get further information at Important Facts and Figures.

October 29, 2010

Question of the Week: What Are the 2011 Highly Compensated Employee Limits?

What Are the 2011 Highly Compensated Employee Limits?
What Are the 2011 Highly Compensated Employee Limits?
This week’s question comes from Cristina, a company president. We’re doing some planning for next year. What are the 2011 Highly Compensated Employee Limits?

IRS Releases 2011 Highly Compensated Employee Limits in IR-2010-108

In IR-2010-108, the Internal Revenue Service (IRS) announced that for 2011 the Highly Compensated Employee Limitation under §414(q)(1)(B) of the Internal Revenue Code of 1986 will remain unchanged. Non-discrimination testing in some types of retirement plans limits the deferral rate of “highly compensated employees” (HCEs) based upon the deferral rate (ADP) of the “non-highly compensated employees”.

Highly Compensated Employee Compensation Limit Remains at $110,000

For 2011, an HCE is anyone who was a “5-percent owner” at any time during 2010 or 2011 or anyone who received in excess of $110,000 in compensation during 2010 and, if elected by the employer, is in the top twenty percent of employees based upon compensation. The HCE limit was $110,000 for 2008 and 2009.

Look-back Provision Impacts HCE Testing Period

Since the law includes a look-back provision, employees who earned more than $110,000 in 2009 are generally considered HCEs for 2010 plan year testing, employees who will earn more than $110,000 in 2010 are generally considered HCEs for 2011 plan year testing, and employees who will earn more than $110,000 in 2011 are generally considered HCEs for 2012 plan year testing.

Contact Vision Payroll for More Information on HCEs

Contact Vision Payroll if you have questions on changes to the HCE definition for 2010 and 2011 or get further information at Important Facts and Figures.

October 18, 2009

IRS Announces 2010 Highly Compensated Employee Limitation

In IR-2009-094, the Internal Revenue Service (IRS) announced that for 2010 the Highly Compensated Employee Limitation under §414(q)(1)(B) of the Internal Revenue Code of 1986 will remain unchanged. Non-discrimination testing in some types of retirement plans limits the deferral rate of “highly compensated employees” (HCEs) based upon the deferral rate (ADP) of the “non-highly compensated employees”. For 2010, an HCE is anyone who was a “5-percent owner” at any time during 2009 or 2010 or anyone who received in excess of $110,000 in compensation during 2009 and, if elected by the employer, is in the top twenty percent of employees based upon compensation. The HCE limit was $100,000 for 2008 plan testing and $105,000 for 2009 plan testing. Since the law includes a look-back provision, employees who earned more than $105,000 in 2008 are generally considered HCEs for 2009 plan year testing, employees who will earn more than $110,000 in 2009 are generally considered HCEs for 2010 plan year testing, and employees who will earn more than $110,000 in 2010 are generally considered HCEs for 2011 plan year testing. Contact Vision Payroll if you have questions on changes to the HCE definition for 2009 and 2010 or get further information at Important Facts and Figures.

October 25, 2008

IRS Announces Increase in 2009 Highly Compensated Employee Limitation

In IR-2008-118, the Internal Revenue Service (IRS) announced an increase for 2009 to the Highly Compensated Employee Limitation under §414(q)(1)(B) of the Internal Revenue Code of 1986. Non-discrimination testing in some types of retirement plans limits the deferral rate of “highly compensated employees” (HCEs) based upon the deferral rate (ADP) of the “non-highly compensated employees”. For 2009, an HCE is anyone who was a “5-percent owner” at any time during 2008 or 2009 or anyone who received in excess of $105,000 in compensation during 2008 and, if elected by the employer, is in the top twenty percent of employees based upon compensation. The HCE limit was $100,000 for 2007 and 2008 plan testing. Since the law includes a look-back provision, employees who earned more than $100,000 in 2007 are generally considered HCEs for 2008 plan year testing, employees who will earn more than $105,000 in 2008 are generally considered HCEs for 2009 plan year testing, and employees who will earn more than $110,000 in 2009 are generally considered HCEs for 2010 plan year testing. Contact Vision Payroll if you have questions on changes to the HCE definition for 2008 and 2009, visit Important Facts and Figures, or get updated information for 2009 and 2010.

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