Can an Owner/Highly Compensated Employee always make the maximum employee 401(k) Salary Deferral mentioned in the previous question?
No. Congress has tied the owners/highly compensated employees salary deferral rates to the lower-paid employees deferral rates. This is done via a discrimination test called the ADP test. In general, whatever the Average Deferral Percentage (ADP) rate is for the staff employees (e.g. 3% of pay) then the owners/highly paid employees can only defer the same overall deferral rate (percentage) plus about 2% (e.g. 5% of pay). Depending on what the rank-and-file employees defer, it may or may not be enough to allow the owners/highly paid employees to defer up to the maximum 401(k) salary thresholds mentioned in the previous question.
