Employee for Qualified Plan purposes?

[Guest bgiles]

We have two greater than 5% owners who up until 2002 received W-2 income. In 2002 they maintain their ownership, have offices, serve on the Board of Directors, and are still involved in decision making but have not received any W-2 income in 2002. They are getting paid a retirement package set up by an attorney which is not reportable on W-2. Under common law rules, could we consider them employees and thus include as HCE's in nondiscrimination testing? We could pay them a few bucks on the W-2 if necessary, and if so, is there a minimum amount that should be adhered to?

[IRC401]

They do not count in the ADP test unless they are receinving W-2 compensation and are eligible under the terms of the Plan to make 401(k) contribuitons.

Are they eligible to "retire" (or whatever they need to do) under the package set up by the attorney and still receive W-2 compensation from the Company?

PS: If the two 5% owners are receiving NQDC, it probably should be reported on a W-2.

[Guest bgiles]

Thanks IRC401.

It was my belief they needed W-2 income as well. We are checking into the retirement package set up for these employees to see if W-2 income can be received.