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Highly Compensated Employee |
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Highly Compensated Employee An employee who owns 5% or more of the company for which he/she works or who makes more income than a certain amount set by the IRS. For tax purposes, highly compensated employees contribute less in tax deductible earnings to a qualifying retirement plan. This is because IRAs and other retirement plans do not qualify for tax advantages if their structures seem to favor highly compensated employees more than other employees. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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401(k) and 403(b) plans do not discriminate in favor of highly compensated employees ( If your life insurance discriminates in favor highly compensated employees according to Section 79 (for example, you offer three times salary as a benefit for your highly compensated employees and one times earnings for all other employees), you must impute income for the full value of the life insurance benefit for your highly compensated employees. This can be an unpleasant surprise to the owner and/or highly compensated employee if this was not communicated in advance. |
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