Key employee, in U.S. Internal Revenue Service (IRS) terminology, is an employee classification used when determining if company-sponsored qualified retirement plans, including 401(a) defined benefit plans and 401(k)s, are considered "top-heavy" or, in other words, weighted towards the company's more highly compensated individuals. A key employee is defined by the IRS as an employee, either living or dead, who meets one of the following three criteria: All other employees are referred to as non-key employees.