Save time with our cheat sheets, fact sheets, checklists & books!

November 12, 2023

Key Employee

Print

Definition

An employee who, at any time during the plan year, is
(i) an officer of the employer having an annual compensation greater than $180,000,

(ii) a 5-percent owner of the employer,

(iii) a 1-percent owner of the employer having an annual compensation from the employer of more than $220,000 (indexed for inflation) .

A plan is determined to be top heavy , if the following applies:

  • Defined benefit plan if, as of the determination date, the present value of the cumulative accrued benefits under the plan for key employees exceeds 60 percent of the present value of the cumulative accrued benefits under the plan for all employees, and
  • Defined contribution plan if, as of the determination date, the aggregate of the accounts of key employees under the plan exceeds 60 percent of the aggregate of the accounts of all employees under such plan

 

Referring Cite

IRC § 416(i))

Additional Helpful Information

  • For purposes of clause (i), no more than 50 employees (or, if lesser, the greater of 3 or 10 percent of the employees) shall be treated as officers
More

Keep Learning

Saver’s Credit

Definition Also known as the Saver’s Tax Credit: Nonrefundable tax credit available to eligible individuals who make contributions to their retirement account. The saver’s credit

Catch-up Contribution

Definition An additional contribution that can be made to a retirement plan by a participant who is at least age-50 by the end of the

Salary Deferral Contribution

Definition A contribution made pursuant to a participant’s election to have a portion of his/her salary/wages  contributed to his/ her employer sponsored plan  rather than

Be among the first to know when

IRA Rules
Change