An employee who owns more than 5% of the business at any time during the current or preceding year, or who earned compensation above a specific IRS threshold ($155,000 for 2024, $160,000 for 2025) in the preceding year. HCE status is important for nondiscrimination testing in 401(k) plans to ensure plans do not disproportionately benefit high earners.
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HCE (Highly Compensated Employee)
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