Frequently Asked Questions

Who are highly compensated employees (HCEs) and key employees?
02/10/2017
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For Cafeteria Plans:

A “highly compensated employee (HCE)” is:

  • An officer; OR
  • A shareholder who owns more than 5%; OR
  • An individual with annual compensation in excess of the following: ($120,000 for years 2015, 2016, 2017; $115,000 for years 2012, 2013, 2014; $110,000 for years 2009, 2010; $105,000 for year 2008; $100,000 for year 2007; OR
  • Spouses or dependents of individuals in the first three categories above

A “key employee” is someone who, during the preceding year:

  • Was an officer with an annual compensation in excess of the dollar limit for that year ($175,000 for year 2017; $170,000 for years 2014, 2015, and 2016; $165,000 for years 2012 and 2013; $160,000 for years 2009, 2010; $150,000 for year 2008; $145,000 for year 2007)
  • Owned more than 5% of the business
  • Owned more than 1% of the business and had an annual compensation greater than $150,000

For Healthcare FSAs and HRAs:

An HCE is:

  • One of the 5 highest paid officers; OR
  • A shareholder owning more than 10%; OR
  • Someone who is among the highest paid 25% of ALL employees; OR
  • Spouses or dependents of individuals in the first three categories above

For DCAs:

An HCE is:

  • A shareholder owning more than 5% during the past or current year; OR
  • An individual with compensation during the past or current year exceeding: $120,000 for years 2015, 2016, 2017; $115,000 for years 2012, 2013, 2014; $110,000 for years 2009, 2010; $105,000 for year 2008; $100,000 for year 2007: if they were not an employee during the preceding year we would use their anticipated salary for the current year; OR
  • Spouses or dependents of individuals in the first three categories

This information may be found in IRS Publication 15-B.