What you should do is roll the amount out of the plan.

The company failed one of the tests for discrimination and it effects people
in the plan for that year. If people with lower compensation don't
participate, the DOL sees it as a plan for the HCE and makes the plan lower
their contribution based on a formula to get it in line with non-highly
comp.

Since you are still in the plan you are counted as a participant. A good
reason to never leave 401k money behind.


"bins" <jdayalu[at]yahoo.com> wrote in message
news:1111643070.622396.194970[at]f14g2000cwb.googlegroups.com...
- quote -

I got a letter from previous employer's 401k plan administrator
indicating the following.

1) I was considered an HCE for tax year 2004 because I have earned
- quote -

2004.
I haven't contributed anything to 401k during 2003 since I was eligible
only after 6 months.

2) I contributed $3200 for the year 2004 from Jan thru March.(left
compacy end of March)
3) Plan administrator said they will return $2700 (a major portion of
my 401k contribution)

My question is that is right to consider me as a HCE given the fact
that I worked with this firm only 3 months during 2004. Also I did not
contribute to 401k in prior year 2003.

Thanks for any help.