Highly Compensated Employees

[Guest jetfaninmn]

Tom and Alice are married and 50/50 owners of a company with a 401(k) plan. They have owned the company 30 years. They have two kids, John and Jane. John is married to Sally and have a child Billy. All work for the company and are eligible to participate in the plan. As far as HCE's go:

 Owned more than 5% of the interest in the business at any time during the year or the preceding year. For purposes of determining ownership, an individual is considered as owning the shares of stock owned by the individual’s spouse, children, grandchildren and parents.

Does this leave Sally put as she is the daughter in law to the owners?

[Guest Pensions in Paradise]

In determining HCE's there is no double attribution. Therefore, the HCE's in your scenario are Tom, Alice, John, and Jane.

Tom - 50% direct owner; 100% owner through attribution (Alice's share)

Alice - 50% direct owner; 100% owner through attribution (Tom's share)

John - 0% direct owner; 100% owner through attribution (parent's shares)

Jane - 0% direct owner; 100% owner through attribution (parent's shares)

Sally - 0% direct owner; 0% attribution (no double attribution through John)

Billy - 0% direct owner; 0% attribution (no double attribution through John, no attribution from grandparents to grandchildren)

[Guest jetfaninmn]

I was under the assumption that in lineal attribution the grandchildren would indeed be owners through their grandparents.

[WDIK]

I believe that stock attribution between grandchildren and grandparents only flows in one direction. In other words a grandparent is attributed stock owned by a grandchild, but a grandchild is not attributed stock owned by the grandparent.