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Nonhighly Compensated Work Force [Internal Revenue]
Understanding the Nonhighly Compensated Work Force [Internal Revenue] and Its Legal Implications
Definition & Meaning
The term "nonhighly compensated work force" refers to a group of employees who do not fall into the category of highly compensated employees. This group includes:
Individuals who have worked for the employer or related entities on a nearly full-time basis for at least one year.
Leased employees associated with the employer.
This definition is important in the context of various employee benefit plans, particularly those related to pension and profit-sharing arrangements.
Table of content
Legal Use & context
The term "nonhighly compensated work force" is primarily used in the context of employee benefit plans under the Internal Revenue Code. It is relevant in areas such as:
Pension plans
Profit-sharing plans
Stock bonus plans
Understanding this term is crucial for employers to ensure compliance with federal regulations regarding employee benefits. Users can manage related forms and procedures using templates from US Legal Forms.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A company employs several individuals in entry-level positions who have been with the company for over a year. These employees qualify as part of the nonhighly compensated work force.
Example 2: A staffing agency provides employees to a company, and those employees have worked there for more than one year. They are considered leased employees and fall under the nonhighly compensated work force category. (hypothetical example)
Relevant laws & statutes
The definition and application of the nonhighly compensated work force are primarily governed by:
26 USCS § 414 - Internal Revenue Code, which outlines rules for pension and employee benefit plans.
Comparison with related terms
Term
Definition
Key Differences
Highly Compensated Employee
An employee who meets certain income thresholds set by the IRS.
Contrasts with nonhighly compensated work force, which includes lower-paid employees.
Leased Employee
An individual who provides services to a company but is employed by a staffing agency.
Leased employees are included in the nonhighly compensated work force if they meet the criteria.
Common misunderstandings
What to do if this term applies to you
If you believe you are part of the nonhighly compensated work force, consider the following steps:
Review your employment status and duration with your employer.
Check if your employer offers any pension or profit-sharing plans that may apply to you.
Explore US Legal Forms for templates related to employee benefits and rights.
If you have questions or need assistance, consider consulting a legal professional.
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A group of employees not classified as highly compensated.
Eligibility Criteria
Must have worked substantially full-time for at least one year.
Includes
Leased employees and regular employees meeting the criteria.
Key takeaways
Frequently asked questions
A highly compensated employee is someone who meets specific income thresholds set by the IRS, distinguishing them from nonhighly compensated employees.
Yes, leased employees can qualify as part of the nonhighly compensated work force if they meet the necessary criteria.
Being classified as part of the nonhighly compensated work force can impact your eligibility for certain employee benefit plans, such as pension and profit-sharing plans.