If you are a Highly Compensated Employee (HCE), you have a unique status in your company. By definition, an HCE either

• owns (directly or indirectly) more than 5% of the company in the current or proceeding year

and/or

• has earned more than $100,000 in compensation in the prior year

As an HCE, you may not be able to contribute as much to your NADART plan as you may like, since government regulations may interfere. A series of nondiscrimination tests is done to make sure that the plan is not favoring Highly Compensated Employees. Simply put, if too many HCEs are contributing to a plan and not enough non-HCEs (also known as rank and file employees) are, then refunds are given to the HCEs in order for the plan to pass this required annual test. If this does not occur, the plan can be disqualified and lose favorable tax treatment for the plan sponsor and participants.

What can you do?

Encourage Non-Highly Compensated Employees to participate in their NADART plans and contribute as much as they can to their accounts. It is of mutual benefit to both you and the Non-Highly Compensated Employees to make sure that they are contributing to the plan. Having enough Non-HCEs contributing will give you the chance to contribute the amount that you want without having to worry about receiving a refund. For Non-HCEs, contributing more to their account will help ensure that they have enough money to retire comfortably.