Who’s Watching You! Identifying Highly Compensated Employees in 401(k) Plan Testing

Unless your employer 401(k) plan wholly follows the safe harbor route, you’ll need to determine who among your employees should be treated as a “highly compensated employee” (HCE). Determining this is one of the most critical steps in maintaining 401(k) plan compliance. The nondiscrimination tests that apply to 401(k) plans rely on a correct HCE determination and mistakes made in HCE status can have adverse consequences, potentially jeopardizing the plan’s tax qualified status.

Read now »

Related Content

• 401(k) Plans: Understanding the Rules
  See how, absent safe harbor status, nondiscrimination requirements apply to 401(k) plans to limit employee contributions, so they don’t discriminate in favor of HCEs. This reflects a broader policy that tax-advantaged retirement plans should not skew their benefit or contribution formulas in favor of HCEs. 
• Safe Harbor 401(k) Plan Resource Kit
  Reference this safe harbor 401(k) plan resource kit to see what we’ve assembled on the topic. Safe harbor plan designs allow plan sponsors to bypass certain nondiscrimination testing requirements that apply to qualified plans that have a cash or deferred arrangement (e.g., 401(k) and 403(b) plans), and that may provide for matching contributions.

Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.    

• Employee Benefits & Executive Compensation Key Legal Developments Tracker
  Stay informed on new developments.
  • Retirement Plans. PBGC revised final regulations on the allocation of assets in single-employer plans to prescribe interest assumptions for plans with valuation dates in the fourth quarter of 2023. These interest assumptions are used for valuing benefits under terminating single-employer plans and for other purposes. 88 Fed. Reg. 62706 (Sept. 13, 2023).
  • Health and Welfare Plans. IRS published an annual notice providing the 2023-2024 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home, specifically (1) the special transportation industry meal and incidental expenses rates, (2) the rate for the incidental expenses only deduction, and (3) the rates and list of high-cost localities for purposes of the high-low substantiation method. R.S. Notice 2023-68.
  • Health and Welfare Plans. Treasury, IRS, Department of Labor, and Health and Human Services (the Agencies), proposed regulations regarding the fees established by the No Surprises Act for the federal independent dispute resolution (IDR) process, as established by the Consolidated Appropriations Act, 2021. The proposed regulationswould provide that the administrative fee charged by the Agencies to participate in the federal IDR process, and the ranges for certified IDR entity fees, would be set by the Agencies through notice and comment rulemaking. 88 Fed. Reg. 65888 (Sept. 26, 2023).
• Generative Artificial Intelligence (AI) Resource Kit is a collection of current guidance on generative AI, ChatGPT, and similar tools.
• Public Interest, Pro Bono, and Non-Profit Resource Kit offers valuable guidance for those providing pro bono legal services and assisting non-profit organizations and public interest groups. It includes useful content on topics including tenant's rights, fair housing and lending, discrimination, immigration, and general non-profit resources. 
• Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts. 
• Practical Guidance Journal Third Edition 2023 features Generative AI cautions and benefits, new trends in lending, environmental law considerations, and market intelligence.
• Check out our Practical Guidance Author Center! Learn about the 1750+ leading attorney authors contributing to our 26 practice areas, and find out how you can Become a Practical Guidance Author. Practical Guidance is committed to amplifying diverse voices of attorneys across all differences, including gender and race.  
• Legal Developments provide the latest updates and analyses of emerging topics impacting your practice area. Visit the Legal Developments page to see the latest topics, which also include breaking legal news and related Practical Guidance content. 
• Listen Up! The Practical Guidance and Law360 Podcasts Resource Kit features interviews with industry-leading attorneys on cutting edge issues in the law: AI, NFTs, Cannabis, and more.
• New and Updated Practical Guidance Content
  • Executive Separation Agreement Negotiation (Pro-executive)
  • Executive Employment Agreement Drafting Checklist
  • Why It’s Time to Regulate Plan Data as an Asset
  • IRS Delays SECURE 2.0’s Roth Catch-up Mandate until 2026
  • Agencies Propose Overhaul of Fixed Indemnity Plan Rules
  • PBGC Finalizes Rule on Asset Valuation and Benefit Payments
  • 5th Circ. Upholds Abortion Pill’s Approval, But Backs Limits
  • Agencies Issue Proposed Regulations on Mental Health Parity Implementation

PRACTICAL GUIDANCE CUSTOMER EMAIL EDITION ON THE WEB

Experience results today with practical guidance, legal research, and data-driven insights—all in one place.

Experience Lexis+