What is the 401k limit for highly compensated employees?
Employees can contribute up to $19,500 to their 401(k) plan for 2021 and $20,500 for 2022. Anyone age 50 or over is eligible for an additional catch-up contribution of $6,500 in 2021 and 2022.
Who is an HCE in 2021?
For the 2021 plan year, as in 2020, an employee who earns more than $130,000 is an HCE.
Can a HCE contribute to 401k?
Highly compensated employees (HCEs) can contribute no more than 2% more of their salary to their 401(k) than the average non-highly compensated employee contribution. That means if the average non-HCE employee is contributing 5% of their salary, an HCE can contribute a maximum of 7% of their salary.
Do HCE limits apply to Roth 401 K?
Benefits of a Roth 401(k) However, Roth 401(k)s are not subject to these income limits. A Roth 401(k) creates a new opportunity for highly compensated employees and officers to save for their retirement and receive 401(k) distributions on an “after-tax” basis.
What is HCE compensation?
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.
How is 401k HCE calculated?
An employee is an HCE if he or she is an employee during the initial plan year (determination year) and is a 5% owner at any time during the plan year or the 12-month period immediately preceding the plan year (lookback year).
What does HCE stand for 401k?
highly compensated employees
More In Retirement Plans Identifying a plan’s highly compensated employees (HCEs) is critical to the operation of a qualified retirement plan. The definition of an HCE is set forth in IRC Section 414(q).