Top heavy and former key ee's

[Guest lindamichals]

when is a key considered a former key? Upon his termination date or after his full distribution? Plan distributed partial to him after his term date, he still has account balance. Thanks.

Linda Michals

[stephen]

If the key employee does not meet the definition of key employee in their year of termination then they are former key that year and in future years unless they become a key employee again.

If the key employee does meet the definition of key employee in their year of termination then they are key that year and former key in future years unless they become a key employee again.

[Tom Poje]

my brain hurts thinking about this so I could be wrong.

if plan year runs 1/1/05 - 12/31/05 then I look at the data from 2004 to see if he was a key.

so I look at all the data from 2004 (w balances) to see if plan is top heavy in 2005.

now it turns out he quit in 2004 as well. if he was a 5% owner it doesn't matter he would still be key.

I guess if he was an officer and his comp is now less than 130,000 (as indexed) he would becaome a former key.

in 2005 it shouldn't matter how much of a distribution he received because he hasn't performed service for a year, and I though those individuals were eliminated - so it doesn't matter if you call him former key or not.