Highly Compensated Employees

Highly Compensated Employees (HCEs) are individuals within a company who earn significantly more than the average worker and hold a senior position or a stake in the company. In the U.S., the Internal Revenue Service (IRS) defines HCEs based on specific salary thresholds and ownership interests. HCEs often have more influence in decision-making processes, and this classification is important for benefits and tax reasons, particularly in retirement plans. Companies must ensure that their benefit plans remain fair and non-discriminatory, maintaining eligibility for lower-paid employees while providing appropriate compensation and benefits for HCEs.