Business and Personal Finance Dictionary

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• HIGHLY COMPENSATED EMPLOYEES
  
  Highly compensated employees are people who earned more than the ceiling the government establishes working for their employer. In 2002, that amount is $85,000. The percentage of earnings that highly compensated employees may contribute to their 401(k) plan is determined by the average percentage of earnings contributed by all lower-paid participants in the plan. If lower-paid employees contribute an average 2% or less, higher-paid employees may contribute two times the percent. If the average is 3% to 8%, higher-paid employees may contribute two percentage points more. And if the average is 8% or higher, the maximum is 1.25 times the percent.
  
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