IRS indexes highly compensated and key employee thresholds
The IRS released Notice 2025-67, updating income thresholds that define highly compensated and key employees for non-discrimination testing across retirement and many non-retirement benefit plans. These updates affect employers offering §125 plans, DCAPs, FSAs, group term life, education assistance, and other benefits that rely on §414(q) definitions to ensure plans do not disproportionately favor higher earners. Employers should review these changes ahead of annual testing, particularly for plans like DCAPs that require early-year preliminary testing.
