Highly compensated employees
at nonprofits can adopt this plan as of the first of any month.
Dependent care assistance must be available and provided on a basis that does not discriminate in favor of highly compensated employees
or their dependents.
The simplified rules will make it much easier for companies to determine who is a highly compensated employee
in testing to determine whether a retirement plan meets nondiscrimination requirements.
These tests are generally designed to ensure that the plan does not significantly discriminate in favor of highly compensated employees
2007-48, released on July 2, 2007, the IRS analyzed the income and employment tax consequences for the employer, the trustee, and the highly compensated employees
who had interests in a 402(b) trust.
The only hard-and-fast rule, as noted earlier, is that the plans may not discriminate in favor of highly compensated employees
It is intended to ensure that benefits provided by an employer in a separate line of business do not unduly disadvantage non-highly compensated employees
or unduly advantage highly compensated employees
regardless of the concentration of highly compensated employees
in the separate line of business.
CPAs can help plan administrators try to meet the requirements by decreasing the benefits of the highly compensated employee
with the highest deferral percentage while still trying to minimize lost tax benefits.
Also, all family members, including adult children, are treated as one highly compensated employee
for applying the nondiscrimination rules to a PSP.
Among the requirements that a defined contribution plan, including a 401(k) plan, must meet is that the plan does not substantially favor highly compensated employees
401(k) plans must meet certain nondiscrimination rules that require non-highly compensated employees
to participate in the plans at certain levels compared with the participation of highly compensated employees
(called the actual deferral percentage (ADP) test).
Ensuring compliance with ACA's non-discrimination rules regarding favoring highly compensated employees
in benefits offered,