"Harlan Lunsford" <lunstax[at]bellsouth.net> wrote:
- quote -

Well, really we need to know whether the subject plan is a
qualified pension plan or some form of non-qualified plan.

For most of the purposes in qualified plans, the definition
of an HCE is found in the regs at 26CFR1.414(q)-1t. In this
definition, the references are all to compensation received,
not rates of pay. So, if subject plan is a qualified plan,
Mitch's pension plan administrator is correct.

See
http://a257.g.akamaitech.net/7/257/2....414(q)-1T.htm

When I retired a few years ago, HCE had never been defined
for purposes of a non-qualified plan of deferred
compensation. It was still a facts and circumstances issue
and I was aware of plans where rates of pay were used. But I
suspect Mitch's plan is a qualified plan and apparently,
he's not going to get the result he wants.

Bob Leavitt

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Mitch wrote:

- quote -

Tempted to say "fire your pension administrator and find
someone who will do it your way." but I won't.

Being a highly compensated employee is a question of fact as
shown by actual wages earned, what what would have been
earned if you had paid him all year.

Cheer$,
Harlan Lunsford, EA n LA

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"Mitch" <mcorriel[at]yahoo.com> wrote:

- quote -

Check out http://www.tiaa-cref.org/pubs/html/taxguide/tg11c.html

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My Pension plan administrator is telling me something that
just does not make any sense. And I'm looking for a tax law
rule or something to back me up.

The situation is as follows;

I am the owner of a very small company and I have only one
employee. My employee earned $98,000 in 2003, but only
earned $12,000 in 2002 because he joined my company in late
November and only worked a few hundred hours in that year.

Now my pension plan administrator says he is NOT a highly
compensated employee for year 2002 becuase his W-2 only
shows $12,000.

But I hired him at a base salary of $95,000. It's just that
he only worked the last six weeks of the year. I think it's
reasonable for the IRS to prorate the salary, or something.
I can take the argument to it's logical extreme. What if I
had hired him on December 31, 2002. Would I have had to pay
him over $90,000 in a single day in order for him to be
considered highly compensated for the year? This is
ridiculous !!!

I put this argument forward to my pension plan administrator
and they said the only thing that matters is what the 2002
W-2 form reports.

Well I think this is ludicrous.

Can anyone shed some light on this?

Thanks in Advance

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