Non-highly compensated employees (NHCE)

A non-highly compensated employee (NHCE) is a term used in nondiscrimination testing to refer to employees who are not highly compensated employees (HCEs). To be an HCE, the employee must meet the ownership test or the compensation test. The ownership test looks to see if the employee or a relative owned more than 5% of the company sponsoring the plan at any time during the current plan year or the previous plan year. The compensation test looks to see if the employee was paid more than a set dollar limit in the prior year. The dollar limit is adjusted for inflation each year. For 2021 it was $135,000.