Definition of Key Employee

The definition of a key employee includes a three part test. To be a current key employee all three tests must be met:

The $150,000 Test

The employee receives reportable compensation in excess of $150,000 during the calendar year ending with or within the organization's tax year from the organization and all related organizations.

Responsibility Test

There are three circumstances that can be met to meet this test:

1. The employee has responsibilities, powers or influence over the organization as a whole that is similar to that held by officers or directors;
2. When compared to the organization as a whole, the employee manages a discrete segment or activity that represents 10% or more of the activities, assets, income, or expenses of the organization; or
3. The employee has or shares the ability to control or determine 10% or more of the organization's capital expenditures, operating budget, or compensation for employees.

Top 20 Test

The employee is one of the top 20 employees who pass the $150,000 and responsibility tests with the highest reportable compensation for the calendar year ending with or within the organization's tax year from the organization and related organizations.

Officers, directors and trustees are not considered key employees.