Thanks dmertz for the replies.
1) You just caught my error and shed more light on this situation. I completely messed. I have been misclassified as an HCE in 2024. And, further, this may have been a misclassification other years. But let me check my understanding with you.
As far as I understand, HCE classification on gross wages is based on the prior year. A Google search revealed:
2025 compensation threshold of $160k
2024 = $155k
2023 = $150k
2022 = $135k
2021 = $130k
2020 = $130k
I found the below here: https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-plans-definitions#:~:text=...
Highly compensated employee – An individual who:
Owned more than 5% of the interest in the business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or
For the preceding year, received compensation from the business of more than $125,000 (if the preceding year is 2019, $130,000 if the preceding year is 2020 or 2021, $135,000 if the preceding year is 2022, $150,000(if the preceding year is 2023 and $155,000 is 2024 if the preceding year is 2024 and, if the employer so chooses, was in the top 20% of employees
I am not understanding if it is based on prior year earning, b/c why does the the IRS, in what I paste, state for instance $135k if the preceding year is 2022?
Isn't it for 2022 $135k but based on 2021 earnings (meaning one has to earn >$135k in 2021 to be classified as an HCE in 2022?)
Now this has got me wondering and trying to decern if my employer correctly classified me any other year. This has got me going a lot deeper in a tax worm hole than I imagined.
So it's not revoking of an employee's classification, but rather revoking this whole HCE non-discrimination testing? What I linked previously reads like it applies to revoking an employees classification in my interpretation.
