2. A publicly traded company has the following 5 employees IN 2014 and their own
ID: 444111 • Letter: 2
Question
2. A publicly traded company has the following 5 employees IN 2014 and their ownership and income are given below:
Employee Name
Annual Salary
Percentage of Ownership in the Firm
Job Title
A
$220,000
2
Chief Executive Officer
B
$135,000-
5
CFO
C
$175,000
3
VP Marketing
D
$128,000
5
VP HR
E
$200,00
6
VP Manufacturing
The company also has 125 other employees such as production workers, secretaries, clerical employees, etc. The company contributes 8% towards retirement for these five employees and 3% towards retirement for the 125 employees.
a. Based on the above information, determine whether employees A through E or key employees or highly compensated employees. Explain your answer.
b. Based on your analysis, determine if the company’s retirement plan violates Internal Revenue Code for non-discrimination.
Employee Name
Annual Salary
Percentage of Ownership in the Firm
Job Title
A
$220,000
2
Chief Executive Officer
B
$135,000-
5
CFO
C
$175,000
3
VP Marketing
D
$128,000
5
VP HR
E
$200,00
6
VP Manufacturing
Explanation / Answer
Employee A to E are highly compensated employee in company. Offcourse they are key employees, but company have to be equal opportunity employer and treat every single employee out of 125 as key employee and compensate to them accordingly.
If company has prepared retirement policy and passed resolution in annual general meeting being a public traded company, it is mandatory for the companty to follow it as per law. If company is violating the policy and discriminating employees based on their grades and importance in the organization it becomes major no-compliance against legal requirements of Internal Revenue code for non-discrimination. Company has no right to discriminate employees and compensate them based on their positions. Strict disciplinary and legal actions should be taken against this company. this should also to be brought under the notice of company's shareholders.
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