Identifying a plan s highly compensated employees hces is critical to the operation of a qualified retirement plan. In making the determination year calculation under a 3 a 2 of this 1 414 q 1 on the basis of the lag period the dollar amounts applicable under a 3 a 1 and of this 1 414 q 1 are to be adjusted by multiplying such dollar amounts by a fraction the numerator of which is the number of calendar months that are included in the lag period and the denominator of which is twelve. This snapshot discusses how to identify highly compensated employees in a plan s initial plan year or in a short plan year based on the definition of an hce is in irc section 414 q.
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