Question

35. Consider the following employee information for ABC Company: Employee Prior Year Compensation Ownership % $150,000 70% $127.000 4% $ 75,000 6% $ 80,000 2% In the year 2019, which of these employees are highly compensated for purposes of the qualified plan coverage rules? A. 1 and 4 B. 1, 2 and 3 C. 3 and 4 D. 2, 3 and 4

Answer 1

According to the Internal Revenue Service, a highly compensated employee is anyone
who has done one of the following things
(i) Owned more than 5% interest in the business at any time during the year or the
preceeding year, regardless of how much compensation that person has earned
(ii) Received more than $ 125,000 as compensation from the business and if the
employee so chooses,was in the top 20% of employees when ranked by compensation
In the scenario provided,we observe the following
Employee 1	Satisfies both the conditions (i) & (ii) for higly compensated employee
Employee 2	Satisfies both the condition (ii) for higly compensated employee
Employee 3	Satisfies both the condition (i) for higly compensated employee
Employee 4	Does not satisfy any of the conditions (i) and (ii)
Answer.
B. 1,2 and 3