Which of the following is true about high compensated employees?

High compensated employees are specifically defined under the IRS guidelines and regulations that pertain to employer-sponsored retirement plans and benefits. The correct understanding of high compensated employees is tied to their ownership stake in the company and income levels.

In this context, individuals who are considered high compensated employees are those who own at least 5% of the company, regardless of their income. This definition is crucial because it helps employers determine the limits for contributions and benefits under various retirement and tax-related plans. It emphasizes ownership as a significant factor, acknowledging that individuals with a substantial stake in the business often have different financial interests and responsibilities compared to other employees.

Understanding this definition is important for compliance with non-discrimination rules in employee benefit plans, which ensure that benefits provided to high compensated employees do not disproportionately favor them over non-high compensated employees.

The other options may refer to aspects of employee compensation or ownership but do not accurately define the parameters set by the IRS for high compensated employees.