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Key Employee

[kee EM-ploi-ee]

What is the definition of Key Employee?
In the context of top heavy plans, a key employee is defined as 1) an officer of the employer earning more than $130,000; 2) an individual who owns more than 5 percent of the employer; or 3) an individual who owns more than 1 percent of the employer and has compensation greater than $150,000.
Using Key Employee in an Example

In determining the top heavy status of a retirement plan, the company identified three key employees: the CEO who earns $200,000, a shareholder owning 6% of the company, and a vice president owning 1.5% of the company with a salary of $160,000.

Using Key Employee in a sentence

During the meeting, the HR manager explained that adjustments to the pension contributions were necessary due to the identification of additional key employees this fiscal year.

Related Terms

Keogh Plan

A qualified retirement plan for self-employed individuals or unincorporated businesses, also known as an HR 10 plan, which allows for tax-deferred contributions and potential tax deductions.
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Key Industry

An industry of primary importance to a nation's economy, often critical for its infrastructure, economic stability, and growth.
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Key Person Insurance

A type of business-owned life insurance contract that is taken out on the lives of principal officers or essential employees of a company, providing guaranteed death benefits to the company and potentially accumulating a cash surrender value.
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Kiting

Kiting is a fraudulent banking practice involving the issuance of checks from an account without sufficient funds, with the expectation that deposits will clear before the checks are processed. This practice exploits the float time between the check being written and its clearance. Kiting can also refer to manipulating the face value of a check or inflating stock prices through deceptive trading strategies.
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