What is the compensation threshold for satisfying the officer owner test in 2021?

In 2021, the compensation threshold for the officer owner test was set at $185,000. This threshold is significant in determining whether a plan meets the requirements for participation and benefit eligibility for owner-employees. The officer owner test assesses whether a plan is discriminatory in favor of highly compensated employees; thus, knowing the specific threshold helps ensure compliance with nondiscrimination rules.

The threshold is annually adjusted to reflect changes in the cost of living and wage trends, which is why it can vary from year to year. In 2021, it was specifically noted to be $185,000, making it essential for plan administrators and sponsors to stay updated on these figures for accurate plan design and implementation. The officer owner test is an essential element of qualified plans, intended to prevent discrimination towards higher-paid employees while ensuring equal treatment for all eligible employees in the retirement plan.