Key EEs in ESOPs

[ESOP Guy]

Not sure why my topic on this question got closed, but...

Does anyone have an opinion on the idea that an ESOP that owns 100% of the stock can not have any 5% owners because the trust owns all the stock?

So even a person with a balance >5% of the stock allocated to them would not be a key unless they are an officer with high enough compensation.

Thanks

[A Shot in the Dark]

ESOP Guy:

I believe you are correct. IRC Sectons 318 and 1563 (attribution rules) specifically exclude stock held by a trust related to a qualified retirement plan. Thus, I believe you do not count the owenership % of the stock held inside the ESOP.

[GMK]

you do not count the owenership % of the stock held inside the ESOP.

Agreed. Ignore the stock in participants' ESOP accounts when determining their ownership %.