Determining Former HCEs

[Guest pdaniels]

In determining HCE status for 1999 401(k) calendar year plan: in 1998, the 100% owner sold business, and received distribution of his entire account balance during 1999. He, along with 2 other HCE's,continue to work with/for the business, but as self-employed, they are 1099'd, are considered independent contractors.

Since they "term'd" in the separation year prior to the detemrination year of 1999, are they considered former HCE's for 1999, plus 4 more years? And if so, this is only for TH testing, not ADP, (for 99)?

[Guest pdaniels]

Revision to my question:

RE: for TH Purposes (these 3 were also "Key" employees); so they would be still be KEY for 5 more years?

RE: ADP testing and other nondiscrim: would they be considered as HCE's? For ADP, no, because they are no longer employees? Think I've just answered my question.

Any input would be appreciated.

[Guest]

I think it is Key for four more years (prior year plus 4 = 5)

then if the $ are still in the plan you ignore them.

if they are no longer employees, then of course they couldn't be hces cuz they don't show up.

independent contractor status is a 'gray' area for me. I would have to look that one up to see how to treat them.