Key Employee

A key employee, as defined by the IRS for retirement plan purposes, is an employee who at any time during the plan year is either an officer earning above a set threshold (for example, over $215,000 in 2024 and increasing with inflation), a 5% owner of the business, or a 1% owner earning more than $150,000; this classification is used to determine if retirement plans are "top-heavy" and ensure benefits are not overly skewed toward owners or executives.