naming groups with a owner by attribution

[betheeg]

my client is 1 owner(100%) and 3 employees. one of the employees is her daughter. how can i name the allocation groups to exclude the daughter from being in the same group as her mother? how will she affect my testing?

thanks for any help.

[Archimage]

I would do something like "Owners" and then "Owners by Attribution". Your testing will not change. The daughter will still be tested as an HCE.

[Tom Poje]

Archimage:

maybe better to name

owners by attribution

owners not by attribution

that way you do not overlap.

if the first group is

owners, that includes both mom and daughter

while that is possible, and an additional contribution could be made to mom

why not be as flexible as you can get

[Archimage]

I understand your logic but is there truly a definition in the IRC that defines an owner of a business using attribution? I realize it for HCEs and keys but for an actual owner?

[betheeg]

thank you for the reply. my next question is if i name the groups owners not by attribution and owners by attribution, can i allocate o% to the daughters group-owners by attribution? it would help me pass testing, and there's no gateway for hce's right?

[Tom Poje]

correct (maybe)

if plan is top-heavy, and top heavy goes to all participants then the daughter has to get the 3% rather than 0% - but not the gateway as she is an HCE.

[AndyH]

betheeg, you should be able to give the daughter the same as the other employees and pass the testing. You may need to use a more advanced procedure than you are familiar with called component plan testing but it can be done. And yes you must watch for the top heavy issue that Tom points out.

[betheeg]

thanks everyone for your help.

[betheeg]

one more thought.....if i use the top paid group election, would the daughter then be tested as an nhce? or does attribution count when figuring the more than 5% owner for top paid purposes?

[Tom Poje]

top paid group only applies to comp, not 5% owners

[betheeg]

right, but i read this in another post.....

"Just to add - the top paid group election will not cause a more than 5% owner to be considered an NHCE. Since all three of your owners own atleast 10%, they will all be considered HCEs regardless of the top paid group election. "

so, if i use the top paid in my situation, 4 ees.... i would have 1 hce but could i not consider daughter to be nhce because she is a more than 5% owner by attribution?

thanks again...

[Archimage]

You have HCEs two different ways: compensation and ownership. The top paid group election applies only to the compensation test. In your case you would use the top 20% of the employees (over $90,000). You would then have to use the ownership test. The daughter is an HCE under the ownership test.