Question

What requirements needs to be met in order to be classified as a "highly compensated" employee? What do you think of this classification.

Answer 1

A highly compensated employee (HCE) is, according to the Internal Revenue Service, anyone who has done one of the following:

• Owned more than 5% of the interest in a business at any time during the year or the preceding year, regardless of how much compensation that person earned or received
• Received compensation from the business of more than $125,000 if the preceding year is 2019; and $130,000 if the preceding year was 2020, and, if the employer so chooses, was in the top 20% of employees when ranked by compensation.