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Highly compensated employees (HCE) To help ensure that companies extend their 401 (k) plans to low-paid employees, an IRS rule limits the maximum deferral by the company's highly compensated employees (HCEs) based on the average deferral by the company's non-highly compensated employees (NHCEs).
The same highly compensated limit ($125,000 a year for the preceding year of 2019 and $130,000 for the preceding year of 2020 or 2021) in place for 401 (k) discrimination testing would likely be acceptable, as would restricting the plan to some class of employees such as directors or officers.
One of the benefits that makes tax-deferred retirement accounts like 401(k) plans so attractive is their high contribution limits. This becomes especially appealing when your company offers a 401 ...
Deferred compensation is also sometimes referred to as deferred comp, qualified deferred compensation, DC, non-qualified deferred comp, NQDC, or golden handcuffs. Deferred compensation is only available to employees of public entities, senior management, and other highly compensated employees of companies.
The pension compensation nondiscrimination laws (Internal Revenue Code Section 401 (a) (4)) require that qualified pension plans not discriminate in benefits, rights and features in favor of highly compensated employees (in 2007, the threshold is $100K of 2006 gross pay including bonuses and overtime).
As of 2007, employers may contribute more for non-highly compensated employees than highly compensated employees. Contributions from an employer or employee may be made on a pretax basis by an employer.
Regulations limit director compensation but not that of immediate family members of the directors who are non-executive employees of the firm. [179] Even with compensation limits, the position of director in large companies is an enviable one with strong incentives not to rock the boat and be pushed out.
This is satisfied by filing with DOL a statement which includes (i) the employer's name, address, employer identification number, (ii) a statement that the plan is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, and (iii) the number of plans and the number ...