An ESOP holds 90% of an employer's stock. 20 employees then own .5% each. In such a situation would the only key employees be the officers and there could be no key employees based on 5% ownership, 1% ownership or top ten owners?

I know in certain instances under the 1.1563 regs you ignore stock held by ESOPs or employer plans in determinng ownership, but I could find no such provisions in 318 or the 318 regs.

Any ownership of shares within the ESOP is not attributed to the individual. I do not have a site, but know the 318 attribution definition in the ERISA Outline Book will confirm this.

Look at Section 318(a)(2)(B)(i).