What is a Highly Compensated Individual (HCI)?
An HCI refers to a highly compensated employee who meets one of the following criteria: is one of the five highest paid officers of a company, is a shareholder of more than 10 percent of a company’s stock (with the application of attribution under section 318), or is one of the highest paid 25 percent of all of a company’s employees. Discrimination in favor of a company’s HCIs with respect to eligibility and benefits is prohibited under IRC ยง105(h) for self-insured plans. The new Health Care Reform law expanded the non-discrimination provisions to non-grandfathered fully insured plans, although recent IRS guidance has delayed the effective date for fully insured plans to comply.
