An employee who is not a highly compensated employee. Plans examine previous year's salary to determine whether an employee fits into one of these two mutually exclusive categories.

The IRS will annually test 401(k) retirement savings plans to see if they unfairly benefit, or discriminate, company owners and highly compensated employees over non-highly compensated employees. In non-discrimination testing (also called compliance testing), non-highly compensated employee rates determine the rate by which owners and highly compensated employees may contribute to their 401(k).

However, either a highly compensated employee or a non-highly compensated employee may also be a key employee, which is any officer whose annual compensation is $170,000 or more, employee who owns more than 5% of the company or is directly related to somebody who does, or employee who owns more than 1% of the company and earns more than $150,000.